Microsoft-OpenAI Face UK Antitrust Probe

The U.K.’s competition regulator has announced an investigation into Microsoft’s partnership with ChatGPT developer OpenAI.

The Competition and Markets Authority (CMA) wants interested parties to provide comment on whether the partnership between Microsoft and OpenAI has resulted in a “relevant merger situation” – where a company hasn’t been merged outright, but certain transactions and arrangements may impact the running of relevant companies, like commercial arrangements or the acquisition of a minority shareholding.

The CMA wants to find out if the multi-billion dollar partnership between Microsoft and OpenAI including the exclusive provision of cloud services by Microsoft to OpenAI has warranted determining whether the pair are in a relevant merger situation and if so, the potential impact on competition. Microsoft has invested $13 billion in OpenAI since 2019 and receives 49% of its profits.

Sorcha O’Carroll, senior director for mergers at the CMA said: “The invitation to comment is the first part of the CMA’s information gathering process and comes in advance of launching any phase 1 investigation, which would only happen once the CMA has received the information it needs from the partnership parties.”

The CMA is actively monitoring the AI space. In September, it issued principles on accountability along with a warning that foundation model developers could ‘quickly’ dominate the market and charge high process to use their models.

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Investigation ‘in light of’ boardroom debacle

CEO Satya Nadella reportedly was furious for not being informed beforehand of Altman’s firing. Credit: Justin Sullivan/Getty Images

The investigation will also look at the recent board room turmoil at OpenAI. In November, CEO Sam Altman was fired in an apparent coup, joined Microsoft, and then four days later was rehired by OpenAI.

The resulting situation sees a new board, with a non-voting observer role for a Microsoft representative. At the AI Summit New York this week, Adam Goldberg, a member of the GTM team for ChatGPT Enterprise for OpenAI, said the company’s board is set to expand but did not say who they would be.

Acknowledging the board room debacle, the CMA said that the “developments” will form a wider part of determining whether the recent developments has had an impact on a relevant merger situation.

Before starting an investigation, the CMA needs to gather information from both Microsoft and OpenAI, including information about their U.K. activities, data and internal documents. This could take months.

Microsoft provided AI Business with a statement from Brad Smith, vice chair and president of Microsoft, which reads: “Since 2019, we’ve forged a partnership with OpenAI that has fostered more AI innovation and competition, while preserving independence for both companies.

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“The only thing that has changed is that Microsoft will now have a non-voting observer on OpenAI’s Board, which is very different from an acquisition such as Google’s purchase of DeepMind in the UK. We will work closely with the CMA to provide all the information it needs.”

OpenAI has been reached for comments.

Understanding the broader AI landscape

Alex Haffner, a competition partner at U.K. law firm Fladgate said the probe is of note given wider concerns about the regulation of AI.

“To move forward with any investigation, the CMA will need to find evidence that the recent fallout from the Sam Altman affair has led to material changes in the governance of OpenAI and, more specifically, Microsoft’s influence over its affairs.

“Nonetheless, even if it does not pursue matters further, by opening a preliminary investigation the CMA will be able to better understand the scope of the governance arrangements [that] underpin the OpenAI project and therefore better inform its broader oversight of the fast developing AI sector.”