Microsoft’s partnership with OpenAI faces antitrust scrutiny in the USA and the UK

The US FTC is currently conducting preliminary examinations of Microsoft Corp’s investment in OpenAI Inc. to determine if it violates antitrust laws and to assess whether Microsoft’s announced investment gives them excessive control over OpenAI. As of now, no formal investigation has been opened, but the agency is analysing the situation and considering its options.

As per Bloomberg sources, Microsoft refrained from reporting the aforementioned investment to the FTC. This decision was based on the assertion that, under US law, the investment made in OpenAI does not confer control over the company. Notably, OpenAI operates as a non-profit organisation, and acquisitions involving non-corporate entities are exempt from reporting obligations under US merger law. However, the spokesperson for the FTC declined to comment on the matter, and Microsoft has yet to issue a response.

In parallel, the UK’s Competition and Markets Authority (CMA) has issued a preliminary invitation to comment asking all concerned parties to submit their initial views regarding whether the partnership has resulted in an impinging merger situation under British law. They also seek insights into the potential impact on competition within the UK. Interested parties have been given until 3 January 2023 to provide comments. The CMA will deliberate on possible steps it might take, if any, following this period.

Sorcha O’Carroll, the senior director for mergers at the CMA, clarified, ‘The invitation to comment is the first part of the CMA’s information-gathering process and comes in advance of launching any phase 1 investigation, which would only happen once the CMA has received the information it needs from the partnership parties.’

Why does it matter? 

The need for such examinations came after a boardroom battle at OpenAI that resulted in the restructuring of OpenAI’s board. As a major backer of OpenAI, Microsoft has been granted a non-voting observer position on the company’s board, allowing them to attend meetings and access confidential information but not to vote on important matters. Still, the details of Microsoft’s ownership stake in OpenAI are in dispute, with a Reuter’s source claiming Microsoft holds a 49% stake through a for-profit subsidiary. At the same time, Microsoft denies this and says the specifics are confidential.