Is Microsoft’s Partnership With OpenAI In Trouble?

As the artificial intelligence race heats up, it’s important to ensure fair play and healthy competition to prevent one company holding all the chips and edging out smaller companies and startups.

At least, that’s what the UK’s Competition and Markets Authority (CMA) is aiming for with its latest review.

The UK’s antitrust agency is reviewing whether the partnership between Microsoft and ChatGPT creator, OpenAI, needs to be scrutinized further. Microsoft, who has been an investor in OpenAI for quite a while, hadn’t been questioned before.

It was questioned by the CMA, with the agency providing the approval for Microsoft’s $69 billion takeover of Activision Blizzard King (read more). In fact, the UK government even recently tied-up with Microsoft to boost AI innovation (read more).

So, what’s the new development that could hamper Microsoft’s relationship with OpenAI and why has it come about now? Let’s explore!
 

What Led To The Review Of The Microsoft-OpenAI Partnership?

 

• In a rather twisted tale that included OpenAI removing their CEO, Sam Altman, then reinstating him within the span of a few days (read more), the equation changed for Microsoft.

• Microsoft, a major investor in OpenAI, saw itself being granted a non-voting, observer position in OpenAI, through a new three-member initial board. The members from Microsoft are yet to be revealed.

• Essentially, this means that Microsoft’s chosen representatives can attend OpenAI board meetings as well as access confidential information but can’t vote on internal matters. This includes electing or choosing directors.

• Over the years, Microsoft has invested huge amounts in OpenAI, with a reported amount to the tune of $13 billion.

• However, the latest developments have made UK, US and EU antitrust authorities question Microsoft’s position with the generative AI leader, OpenAI.

• The UK’s Competition and Markets Authority said, “There have recently been a number of developments in the governance of OpenAI, some of which involved Microsoft.” The CMA has invited comments from interested companies such as Google and others by January 3, 2024.

• Meanwhile, the EU competition enforcer said, “While this transaction has not been formally notified, the (European) Commission has been following very closely the situation of control over OpenAI already before the recent events involving its management, including Microsoft's role on the OpenAI board and the investment agreements between Microsoft and OpenAI.”

• Reportedly, even the US Federal Trade Commission (FTC) is pondering if the investment violates antitrust laws, with preliminary inquiries not being opened formally. However, the FTC declined to comment.

However, Microsoft had a rebuttal.
   

What Did Microsoft And OpenAI Say?

 

• In a statement, Frank Shaw, Chief Communications Officer for Microsoft, conveyed that the company doesn’t own any part of OpenAI, saying, “While details of our agreement remain confidential, it is important to note that Microsoft does not own any portion of OpenAI and is simply entitled to share of profit distributions.”

• Brad Smith, Microsoft President said in statement, “the only thing that has changed is that Microsoft will now have a non-voting observer on OpenAI's board,” adding that it “is very different from an acquisition such as Google's purchase of DeepMind in the UK.”

• Even an OpenAI spokesperson said, “Our partnership with Microsoft empowers us to pursue our research and develop safe and beneficial AI tools for everyone, while remaining independent and operating competitively. Their non-voting board observer does not provide them with governing authority or control over OpenAI’s operations.”

Do you think the partnership between Microsoft and OpenAI should be reviewed to ensure healthy competition in the artificial intelligence sector? Does the current arrangement between Microsoft and OpenAI violate fair play?

Let us know in the comments below!