Microsoft, OpenAI's partnership comes under antitrust scrutiny in the UK, US

Microsoft’s partnership and investment in OpenAI, the creator of ChatGPT, is now under antitrust investigation in both the United States and the United Kingdom, as reported by British regulators and media outlets on Friday. This scrutiny follows internal conflicts at OpenAI, resulting in the sudden removal and subsequent reinstatement of CEO Sam Altman. In the aftermath of the recent upheaval, Microsoft, a significant supporter of OpenAI, secured a non-voting observer position on the company’s board. The new three-member initial board allows Microsoft’s representatives to attend board meetings and access confidential information but prohibits them from participating in crucial decisions such as the election or selection of directors. Details regarding the individual from Microsoft taking the non-voting position and the composition of the final OpenAI board remain undisclosed. While OpenAI’s parent is a non-profit organization typically not subject to antitrust scrutiny, it established a for-profit subsidiary in 2019, with Microsoft holding a reported 49% stake. However, a Microsoft spokesperson contradicted this, asserting that agreement details were confidential, denying any ownership stake in OpenAI, and asserting only a share of profits entitlement. Microsoft has committed over $10 billion to OpenAI, positioning itself to lead in the competitive race for AI revenue, challenging Alphabet’s Google. The UK Competition and Markets Authority (CMA) stated on Friday that recent governance developments in OpenAI, involving Microsoft, prompted a review to assess if Microsoft’s investment could adversely impact competition in the UK. Simultaneously, the US Federal Trade Commission (FTC) is conducting preliminary inquiries to determine if antitrust laws were violated, with no formal investigation initiated as of yet. Microsoft President Brad Smith emphasized that the recent change merely granted Microsoft a non-voting observer status, distinguishing it from acquisitions such as Google’s 2014 purchase of DeepMind in the UK. Anticipating potential regulatory action, Max von Thun from Open Markets Institute urged antitrust authorities to act swiftly, emphasizing the need to investigate and potentially unwind deals to prevent monopolization in the rapidly evolving AI sector. European Union antitrust regulators are closely monitoring the situation, and the UK’s CMA has invited interested parties, including Google, to provide comments by January 3, 2024. The CMA’s decision on whether to pursue a full probe will depend on evidence of changes in OpenAI’s governance and Microsoft’s influence following the Altman affair. This investigation adds to Microsoft’s recent encounters with antitrust regulators, notably related to its $69 billion acquisition of Activision Blizzard, where the CMA initially blocked the deal but later approved it after Microsoft adjusted its acquisition plan. (With inputs from agencies)