The UK competitions watchdog has opted against an investigation into whether Microsoft is exerting too much influence at OpenAI, maker of generative AI platform ChatGPT.
The Competition and Markets Authority said in late 2023 that it was considering whether to investigate the partnership and was seeking views on whether their relationship was effectively a merger – and if so, its effect on competition.
The CMA was especially looking at its role in securing the return of Sam Altman (pictured) to the helm of OpenAI.
In 2023 co-founders Altman and Greg Brockman were removed by its board of directors – which oversees the company’s then non-profit mission – after it accused Altman of not being “consistently candid in his communications with the board, hindering its ability to exercise its responsibilities”.
The backlash saw almost all of OpenAI’s 770 employees sign an open letter calling on its board to resign and for the reinstatement of Altman and Brockman, both of whom were quickly hired by Microsoft – which had invested billions of dollars in OpenAI in return for a 49% stake – to lead “a new advanced AI research team”, seen as a move to give them oversight over OpenAI despite their removal. Microsoft also extended a hiring invitation to all its workers.
Soon afterwards, a deal was agreed to reinstate Altman as CEO with a new board, while Brockman also confirmed his return.
However the CMA has decided there is no case to answer, concluding that Microsoft “exerts a high level of material influence” over OpenAI’s commercial policy without fully controlling it.
“Because this change of control has not happened, the partnership in its current form does not qualify for review under the UK’s merger control regime,” CMA executive director for mergers Joel Bamford posted on LinkedIn.
“The CMA’s findings on jurisdiction should not be read as the partnership being given a clean bill of health on potential competition concerns; but the UK merger control regime must of course operate within the remit set down by Parliament.”
Keir Starmer’s Labour government has seemingly sought to strip back the powers wielded by the CMA to block deals, with Marcus Bokkerink – who had only served as chair of the anti-trust regulator since 2022 despite the position carrying a five-year term – resigning in January in favour of the interim appointment of Doug Gurr, a former Amazon UK boss.
The government has asked regulators to refocus on growth rather than red tape.
“We are not blind to the length of time that this investigation has taken… We know pace matters to business confidence and investment,” Bamford added.
Microsoft stated: “Our OpenAI partnership and its continued evolution promote competition, innovation, and responsible AI development, and we welcome the CMA’s conclusion, after careful and prudent consideration of the commercial realities, to close its investigation.”
Alex Haffner, a competition partner at law firm Fladgate, said the decision had been reached on purely procedural grounds – namely “whether Microsoft had, through the operational/other changes announced around the time of Sam Altman’s initial departure from the business, achieved a higher level of control over Open AI (at least for merger control purposes) than it had before they took effect”.
“The CMA has concluded no such change of control has taken place and, in particular, Microsoft doesn’t at this time have the ability to control the company’s commercial policies. In that sense, it is relatively straightforward,” he continued.
“However, against the current narrative of how to regulate Big Tech and, notably disquiet in some quarters as to whether the CMA is being leaned on too heavily by government to change its approach, the decision will no doubt further fan the flames of discontent amongst certain interest groups.”