The US and UK antitrust authorities are investigating Microsoft's collaboration with ChatGPT creator OpenAI, according to the British regulator and a press report on Friday. This comes after a boardroom dispute at the startup that resulted in CEO Sam Altman's sudden dismissal and reappointment.
Following the dramatic incident last month, a new three-member initial board appointed Microsoft, a significant OpenAI backer, as an observer with no voting rights. The Microsoft representative is not able to cast a vote on issues such as selecting or electing directors, but they are able to attend OpenAI's board conferences and access confidential data.
Both firms have not disclosed the identity of the Microsoft representative who will hold the non-voting position or the composition of the ultimate OpenAI board.
The parent company of OpenAI is a non-profit organization, which is not often the subject of antitrust investigations. A source claims that it established a for-profit subsidiary in 2019, of which Microsoft owns 49%. A Microsoft representative refuted this on Friday, claiming that the company does not own any portion of OpenAI but is entitled to a portion of the profits, adding that the specifics of the agreement are confidential.
The software behemoth has pledged to invest over $10 billion in the startup, giving it an advantage over Alphabet's Google in the competition for AI revenue.
The United Kingdom Competition and Markets Authority said on Friday that there have been several recent developments in the management of OpenAI, some of which were associated with Microsoft.
In order to determine whether Microsoft's investment could harm UK competition, the CMA is considering whether it should launch an investigation into it.
According to Bloomberg News, the US Federal Trade Commission (FTC) is also looking into the possibility that the investment may have broken antitrust laws. However, the agency has not yet launched an official probe, and the inquiries are only preliminary.
The FTC chose not to respond. The only change, according to Microsoft President Brad Smith, is that Microsoft is to have a non-voting representative on OpenAI's board.
Move quickly
Max von Thun, Europe head of Open Markets Institute, a not-for-profit organization dedicated to bolstering antitrust law, stated that more regulatory probes might come in light of the increasing concentration on AI.
He said that in order to maintain competition and stop this crucial emerging technology from becoming monopolized, antitrust authorities must act swiftly to investigate these transactions and, if necessary, undo them.
Antitrust officials in the European Union said that they have been paying close attention to the situation.
The CMA of Britain has extended an invitation to interested parties, including Google, to provide feedback on the review by January 3, 2024.
According to Alex Haffner, a partner of Fladgate and a competition attorney, the CMA will have to find proof that the publicity surrounding the Altman affair has resulted in significant changes to OpenAI's governance and Microsoft's influence on OpenAI's affairs.
The preliminary inquiry will enhance the CMA's broader supervision of the rapidly evolving AI industry, he said, even if it decides not to pursue a thorough investigation.
Due to antitrust issues, Microsoft recently got into a legal battle with the FTC and the CMA regarding its 69 billion-dollar acquisition of Activision Blizzard, the company that makes the "Call of Duty" videogames.
Prior to Microsoft modifying its acquisition plan, the CMA had opposed the Activision deal, but it later changed its mind.