The UK Competition and Markets Authority (CMA) is currently investigating the partnership between Microsoft and OpenAI to determine whether it poses a threat to competition in the country. This investigation comes at a time when the generative AI industry is rapidly developing and regulators worldwide are taking notice.
The CMA has reached out to interested parties, including Microsoft and OpenAI, to gather more information and feedback. Depending on the outcome, a formal antitrust investigation may be launched by the British agency.
Tech giants like Amazon, Google, and Meta have been engaging in numerous deals with AI startups this year to expedite the development and launch of AI products. Due to increased antitrust scrutiny, these companies have turned to partnerships with startups rather than outright acquisitions.
OpenAI’s development of ChatGPT has played a significant role in solidifying Microsoft’s presence in the AI space. The tech giant has announced several AI products, such as an enhanced version of Bing with AI and Copilot, an AI assistant, putting it ahead of its competitors. As a result, Microsoft’s stock has risen by 54% this year.
The CMA’s investigation follows recent turmoil at OpenAI when CEO Sam Altman was temporarily ousted, only to make a prompt return. While the situation seems to have calmed down, these events have brought attention to OpenAI’s relationship with Microsoft.
During Altman’s brief absence, Microsoft CEO Satya Nadella assured him and OpenAI employees that they would have jobs at Microsoft, addressing concerns that many had threatened to leave unless Altman was reinstated.
Reports suggest that Microsoft has invested around $10 billion for a 49% stake in OpenAI. However, Microsoft’s Chief Communications Officer, Frank Shaw, clarified that they do not own any portion of OpenAI and are entitled to a share of the startup’s profit distributions.
As part of their partnership, Microsoft is the exclusive cloud services provider for OpenAI. Once Microsoft’s investment is recouped, they will receive a portion of OpenAI’s profits up to the agreed cap, with the remainder going to OpenAI’s nonprofit organization.
OpenAI’s recent leadership changes have resulted in a new board consisting of individuals like Bret Taylor, the former CEO of Salesforce, Larry Summers, the former US Treasury secretary, and Adam D’Angelo, the CEO of Quora. Additional members are expected to join, and Microsoft is included as a non-voting observer on the board.
After the announcement by the CMA, Microsoft President Brad Smith emphasized the distinction between their partnership and Google’s acquisition of DeepMind in the UK in 2014. He highlighted that Microsoft’s collaboration with OpenAI has fostered innovation and competition without compromising the independence of either company.
This investigation by the CMA reflects the growing interest of regulators in the rapidly evolving generative AI industry. As Microsoft and OpenAI face scrutiny, it remains to be seen how this investigation will unfold and the potential impact it may have on the AI landscape in the UK and beyond.
