CMA, the regulatory body responsible for ensuring fair competition and consumer protection in the United Kingdom, has officially launched an inquiry into Microsoft Corporation’s partnership with OpenAI. The CMA’s primary focus is to investigate the potential risks to competition and consumer protection arising from the close collaboration between these tech giants.
CMA’s concerns regarding AI competition and innovation
The CMA has expressed apprehension about the need for sustained competition among AI developers to foster innovation, growth, and responsible practices within the AI sector. The rapid expansion of artificial intelligence across various applications and markets, coupled with the development of powerful foundation models (FMs), has made this moment pivotal in the evolution of this transformative technology.
Microsoft’s involvement with OpenAI dates back to its early days, with a significant $10 billion investment in the company. OpenAI, originally founded as a non-profit organization in 2015 by Sam Altman and Elon Musk, has since achieved an estimated valuation of $86 billion. Microsoft holds a substantial 49% stake in the organization and enjoys a profit-sharing agreement as well as preferential access to OpenAI’s cutting-edge technology.
CMA’s investigation focus
The CMA’s inquiry aims to determine whether Microsoft’s substantial investment in OpenAI has led to the creation of a “relevant merger situation” as defined by the Enterprise Act. Furthermore, the regulator seeks to evaluate whether the emergence of such a situation may be expected to substantially diminish competition in any of the United Kingdom’s markets for goods or services.
Examining the financial aspects of the partnership, the CMA is closely scrutinizing the recent leadership turmoil at OpenAI. This turmoil was sparked by the sudden and dramatic changes in Sam Altman’s position within the company. Altman, who was initially a key figure at OpenAI, found himself terminated by the OpenAI board, subsequently hired by Microsoft, and then swiftly rehired by the OpenAI board – all within the span of a few days in late November.
This internal power struggle resulted in the removal and replacement of several board members at OpenAI, with Microsoft poised to assume a non-voting position in the organization following the upheaval.
CMA’s information-gathering process
Sorcha O’Carroll, the senior director for mergers at the CMA, emphasized that the invitation for comments marks the initial phase of the CMA’s information-gathering process. This preliminary step precedes the launch of any formal Phase 1 investigation, which will only commence after the CMA has acquired the necessary information from the involved parties in the partnership.