UK’s CMA may review Microsoft, OpenAI tie-up
It is the second time in 2023 the watchdog has looked at issues involving the US software firm
Britain’s antitrust regulator said on Friday it will review whether to launch a merger probe of Microsoft’s multibillion dollar partnership with ChatGPT maker OpenAI, weighing in on the US software giant’s operations for a second time this year.
The review will consider whether the tie-up has resulted in an “acquisition of control,” the Competition and Markets Authority (CMA) said on Friday.
It is the second time in 2023 the regulator has looked at competition issues surrounding the US software giant’s operations. The CMA said it will be considering if the OpenAI partnership had resulted in the creation of a merger situation, before deciding on any official investigation.
“There have recently been a number of developments in the governance of OpenAI, some of which involved Microsoft,” the CMA said.
“In light of these developments, the CMA is now issuing an ITC to determine whether the Microsoft/OpenAI partnership, including recent developments, has resulted in a relevant merger situation and, if so, the potential impact on competition.”
The speed at which the use of AI technology is growing is unrivalled in economic history, while advances in powerful foundation models, such as the one underpinning ChatGPT mean that this is a pivotal moment in the development of this transformative technology, the CMA said.
The move comes after a November announcement that Microsoft, which has committed to invest more than $10bn into OpenAI, will take a nonvoting position on the board. That followed
a tumultuous boardroom battle which saw the sudden ouster and return of OpenAI CEO and founder Sam Altman.
Microsoft owns 49% of the for-profit operating company, according to sources familiar with the matter. OpenAI has a nonprofit parent which owns 2%, those sources said.
“The only thing that has changed is that Microsoft will now have a nonvoting observer on OpenAI’s Board, which is very different from an acquisition such as Google’s purchase of DeepMind in the UK,” said Microsoft vice-chair and president
Brad Smith in a statement, taking a swipe at its main rival.
He said the company will work closely with the CMA. OpenAI did not immediately respond to a request for comment.
The observer position means Microsoft’s representative can attend OpenAI’s board meetings and access confidential information, but it does not have voting rights on matters including electing or choosing directors.
SCRUTINY
The CMA will need to find evidence that the recent fallout
from the Altman affair has led to material changes in the governance of Open AI and Microsoft’s influence over its affairs, said Alex Haffner, competition lawyer and partner at Fladgate.
“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 which underpin the Open AI project and therefore better inform its broader oversight of the fast developing AI sector,” Haffner said .
On Friday, the CMA kickstarted the review with an invitation to interested parties like Google and other rivals to comment by January 3.
The regulator, which has made global headlines with a combative approach since Britain’s departure from the EU, blocked Microsoft’s $69bn acquisition of Activision Blizzard, the “Call of Duty” video game maker earlier in the year, to the fury of the two US companies.
It later changed its mind after Microsoft amended its acquisition plan.