Microsoft-OpenAI partnership under scrutiny from UK and US regulators

The partnership between ChatGPT maker OpenAI and its biggest backer Microsoft is under scrutiny from UK and US regulators, following the dramatic removal and subsequent return of OpenAI chief executive Sam Altman.

After the series of tumultuous events last month, Microsoft was granted a non-voting observer position at OpenAI by its new board comprising chairman Bret Taylor, Larry Summers and Adam D’Angelo.

But while Redmond, Washington-based Microsoft can access OpenAI’s confidential information and attend its board meetings, the company has no voting power.

“There have recently been a number of developments in the governance of OpenAI, some of which involved Microsoft,” the UK’s Capital Markets Authority said.

“In light of these developments, the CMA is now issuing an ITC [invitation to comment] to determine whether the Microsoft/OpenAI partnership, including recent developments, has resulted in a relevant merger situation and, if so, the potential impact on competition.”

An ITC is the first part of the authority’s information gathering process and comes in advance of any launch of a formal phase one investigation, which is also the initial review to determine if a partnership raises prima facie concerns.

“The CMA will review whether the partnership has resulted in an acquisition of control – that is, where it results in one party having material influence, de facto control or more than 50 per cent of the voting rights over another entity – or change in the nature of control by one entity over another,” the CMA said.

Microsoft said that it does not own any stake in OpenAI.

“While details of our agreement remain confidential, it is important to note that Microsoft does not own any portion of OpenAI and is simply entitled to a share of profit distributions,” a Microsoft representative said.

Earlier on Friday, Microsoft president Brad Smith said the “independence” of both companies was maintained.

“Since 2019, we’ve forged a partnership with OpenAI that has fostered more AI innovation and competition, while preserving independence for both companies,” he said in a post on X, the platform formerly known as Twitter.

“The only thing that has changed is that Microsoft will now have a non-voting observer on OpenAI’s board … we will work closely with the CMA to provide all the information it needs,” he said.