Microsoft’s primary investment for 2023 faces potential issues. On Friday, December 8, the UK’s Competition and Markets Authority (CMA) disclosed its consideration of initiating a merger probe into Microsoft’s investment in OpenAI, the creator of ChatGPT. Concurrently, the US Federal Trade Commission (FTC) is also scrutinizing the deal. Consequently, Microsoft’s substantial investment in ChatGPT, executed earlier this year, encounters challenges in both the US and the UK. Microsoft’s investment in OpenAI amounts to around $13 billion, and the integration of OpenAI’s products into Microsoft’s core businesses adds complexity to the situation.
The examination follows the recent intense leadership conflict at OpenAI, resulting in the removal and subsequent reinstatement of CEO Sam Altman. Microsoft, holding a 49% stake in OpenAI, has pledged an investment exceeding $10 billion in the company.
What is on the line for Microsoft and OpenAI?
The UK’s CMA and the US’ FTC express apprehension that Microsoft’s investment in OpenAI might grant the software giant excessive influence over both OpenAI and its technology. Such dominance could potentially undermine competition in the AI market, making it challenging for other companies to contend with Microsoft’s substantial financial resources and access to OpenAI’s capabilities. Given the unprecedented pace of AI technology advancement, the CMA deems this a crucial juncture in the technology’s development.
What actions are the regulators taking?
The CMA has extended an invitation for interested parties to provide their comments on the transaction until January 3, 2024. The FTC’s investigations are currently in the preliminary phase, and a formal inquiry has not yet been initiated.
What is Microsoft’s response?
Microsoft has justified its collaboration with OpenAI, contending that it will contribute to the responsible and secure development of AI technology. The company has additionally stated its commitment to collaborating closely with the CMA and the FTC to address any concerns raised. In a statement, Microsoft’s Vice-Chair and President, Brad Smith, took a jab at Google, noting, “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.
What could be the potential repercussions?
Should the CMA or the FTC determine that Microsoft’s investment in OpenAI breaches antitrust laws, they have the authority to mandate Microsoft to divest its stake in the company or enforce other restrictions on the partnership.
What comes next?
It is premature to predict the outcome of the investigations. Nevertheless, it is evident that Microsoft’s collaboration with OpenAI is undergoing meticulous examination by antitrust regulators in both the UK and the US. The actions taken by the UK and the US also prompt speculation about whether antitrust regulators in the European Union will initiate a comparable inquiry. In response to inquiries about the CMA’s actions, a spokesperson from the European Commission mentioned that the regulator has been “closely monitoring the situation regarding control over OpenAI.”