UK competition authority mulls investigating Microsoft-OpenAI partnership

The UK Competition and Markets Authority (CMA) invited interested third parties to comment on Microsoft’s ongoing partnership with OpenAI on Friday (8 December).

Microsoft has invested a total of $13 billion in OpenAI, the leading AI company behind the world’s most famous chatbot, ChatGPT. However, as the terms of the partnership are not publicly known, the regulator is considering whether the links might be tantamount to an acquisition.

The ‘Invitation to Comment’ means that interested third parties can share their opinions with the CMA on, for example, the impact the merger could have on the UK market.

Providing this early opportunity is the first step of the CMA’s information gathering about the potential acquisition. This is a process the UK authority follows before they launch a formal investigation.

As Sorcha O’Carroll, senior director for mergers at the CMA noted, a formal probe “only happens once the CMA has received the information it needs from the partnership parties”.

Earlier this year, the CMA already looked into the matter, but according to the authority, developments have been made since then, on which they are also inviting the parties’ views.

“The only thing that has changed is that Microsoft will now have a non-voting observer on Open AI’s Board, which is very different from an acquisition such as Google’s purchase of DeepMind in the UK,” Microsoft President and Vice Chair Brad Smith said.

Google bought the London-based artificial intelligence company DeepMind in 2014.

“We will work closely with the CMA to provide all the information it needs”, Smith added.

Alex Haffner, a competition partner at the law firm Fladgate, said that “considering whether to investigate the Microsoft/Open AI partnership under its merger control powers is particularly interesting given wider concerns about the regulation of AI”.

He believes that to move forward “with any investigation”, the CMA “will need to find evidence that the recent fall-out from the Sam Altman affair has led to material changes in the governance of Open AI and, more specifically, Microsoft’s influence over its affairs”.

At the end of November, much back and forth followed after the OpenAI’s board dismissed its CEO, Sam Altman, and other members left the firm in protest. It was reported that Microsoft has hired its co-founders Altman and Greg Brockman to head up a “new advanced AI research team”.

However, later the same week, it was announced on X by OpenAI that they “have reached an agreement in principle for Sam Altman to return to OpenAI as CEO with a new initial board”.

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Regulation and governance

Chairman and CEO of Microsoft Corporation Satya Nadella wrote in a post on X in November that they “are encouraged by the changes to the OpenAI board” and believe that they are “a first essential step on a path to more stable, well-informed, and effective governance”.

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

Kris Shrishak, Enforce Senior Fellow at the Irish Council for Civil Liberties told Euractiv that “Microsoft’s investments and deals with OpenAI that go back many years should have raised red flags long ago. Now better than never. Hopefully, there will be investigations into the investments from Amazon and Google as well.

OpenAI is already backed by Microsoft, making it a multi-billion-dollar investment. At the end of January, the ChatGPT maker announced that it is extending the partnership with the tech giant, following the investments of 2019 and 2021.

Big Tech companies backing up leading AI firms like Microsoft with Open AI and Amazon with Anthropic have been pointed out as a way these large corporations might gain control of this rapidly growing market.

Open AI also works on Microsoft’s cloud service Azure, “a cloud-based platform that enables developers and data scientists to build and deploy AI models quickly and easily”. The Azure Open AI Service was first launched in November 2021.

The CMA will investigate whether Microsoft has gained control over Open AI, namely if it got de facto control of 50% or more of its voting rights. Regardless, just by having a non-voting member on the company’s board, Microsoft can theoretically access confidential information and attend board meetings.

[Edited by Luca Bertuzzi/Nathalie Weatherald]

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