In a surprising turn of events, the partnership between tech giant Microsoft and OpenAI, the creator of ChatGPT, is now under the radar of antitrust scrutiny in both the US and the UK. The focus intensified following a recent boardroom upheaval at OpenAI that saw CEO Sam Altman ousted and then reinstated.
Microsoft’s New Role: Non-Voting Observer
Microsoft, a significant supporter of OpenAI, has been granted a non-voting, observer position on OpenAI’s board. This unique role allows Microsoft’s representative to attend board meetings, gaining access to confidential information. However, the catch is that they cannot participate in critical decisions such as electing directors.
The details about who from Microsoft will assume this non-voting position remain undisclosed, adding an element of mystery to the unfolding scenario.
OpenAI’s Complex Structure and Microsoft’s Stake
OpenAI’s parent company operates as a non-profit entity, a status typically exempt from antitrust scrutiny. However, in 2019, OpenAI established a for-profit subsidiary, in which Microsoft purportedly holds a 49% stake, as per an unnamed source. This information, however, was contradicted by a Microsoft spokesperson on Friday, asserting that the specifics of their agreement are confidential, and Microsoft doesn’t “own any portion” of OpenAI. The spokesperson did mention, though, that Microsoft is entitled to a share of the profits.
Microsoft’s Significant Investment and Commitment
Microsoft’s commitment to inject over $10 billion into OpenAI positions it as a major player in the competitive race for AI revenue, putting it head-to-head with Google’s Alphabet.
UK Regulatory Involvement
The UK Competition and Markets Authority (CMA) has taken note of the recent developments in OpenAI’s governance, particularly those involving Microsoft. The CMA is actively considering whether to launch a formal probe into Microsoft’s investment to assess potential impacts on competition in the UK.
US Federal Trade Commission’s Preliminary Inquiries
Simultaneously, the US Federal Trade Commission (FTC) is reportedly conducting preliminary inquiries into whether Microsoft’s investment may have breached antitrust laws. It’s important to note that these inquiries are in their early stages, and the FTC has not initiated a formal investigation at this point.
In response to the growing scrutiny, Microsoft President Brad Smith emphasized that the only change is Microsoft’s new non-voting observer status on OpenAI’s board. He drew a distinction by pointing out that this arrangement differs significantly from acquisition scenarios, such as Google’s purchase of DeepMind in 2014.
Conclusion: Unraveling the Complex Dynamics
As the narrative unfolds, the intricate dynamics between Microsoft and OpenAI are becoming a focal point of attention. The combination of non-profit and for-profit entities, coupled with the substantial investment and boardroom drama, creates a compelling narrative that industry watchers will undoubtedly follow closely.
This unexpected twist in the tech saga raises questions about the evolving landscape of AI collaborations and the level of regulatory scrutiny they may attract in the future.
