Under the scrutiny of regulatory oversight in the United States and the United Kingdom, Microsoft collaborated with OpenAI, the maker of ChatGPT, according to a British legislator and a media report released on Friday, following the battle that took place in the board room of the startup that led to the firing of CEO Sam Altman and his sudden return.
British and American Regulatory Review
Microsoft, one of the prominent supporters of OpenAI, grants a non-voting observer position to the company by a new three-member board of directors. The Microsoft representative can attend OpenAI board meetings and access confidential information, but cannot vote on matters including the election or appointment of directors.
Regulatory Investigations
Neither company disclosed the identity of the representative who will hold the non-voting position or how OpenAI’s final board of directors will look.
OpenAI is the parent company of a non-profit organization, a type of entity that is rarely subject to competitive regulatory scrutiny. In 2019, it established a for-profit subsidiary, in which Microsoft holds a 49% stake, according to a source. However, a Microsoft spokesperson denied this on Friday, stating that the details of its agreement are confidential, that it does not own any part of OpenAI, and that it has a right to a share of the profits.
Impact on Competition
The software company has committed to investing over $10 billion in the startup, allowing it to lead the revenue race related to artificial intelligence against Google, a subsidiary of Alphabet.
The UK Competition and Markets Authority stated on Friday that it is considering whether to launch an investigation into Microsoft’s investment to see if it could impact competition in the UK.
The Federal Trade Commission (FTC) in the United States is also examining whether the investment may violate antitrust laws, and Bloomberg reported that the investigations were exploratory and that the agency had not opened a formal investigation.
Importance of Regulatory Oversight
Max von Thun, Director of Europe at the Open Markets Institute, a nonprofit focused on promoting antitrust law, said, “It is essential for competition authorities to move quickly to investigate these deals, including potentially blocking them if necessary, to preserve competition and prevent this critical emerging technology from becoming monopolized.”
European regulatory officials stated that they are “closely monitoring the controlling situation.”
The UK Competition and Markets Authority has invited interested parties such as Google to comment on the review by January 3, 2024.
The Competition and Markets Authority will need to find evidence indicating that the recent split in the Altman case led to material changes in OpenAI’s governance and Microsoft’s influence over its affairs, according to Alex Hafner, a competition lawyer and partner at Fladgate.
Even if it does not seek to conduct a full investigation, the initial inquiry would enhance the Competition and Markets Authority’s broader oversight of the rapidly evolving AI sector, he noted.
Microsoft has recently engaged with both the FTC and CMA regarding its $69 billion acquisition of video game maker “Call of Duty” Activision Blizzard due to antitrust concerns.
The Competition and Markets Authority had previously blocked the Activision deal earlier in the year but later changed its mind after Microsoft modified its acquisition plan.
Reports by Moviga M and Sarah Young in London, Shafi Meta and Aditi Soni in Bangalore, and Diane Bartz and Chris Sanders in Washington; additional reporting by Martin Coulter in London and Fu Yunqi in Brussels; writing by Josephine Mason and Sayantani Ghosh; editing by Kylie MacLellan, Kate Holton, Eileen Hardcastle, David Evans, Susan Fenton, and Richard Chang.
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