UK Market Regulator Reviews Microsoft’s Interest in OpenAI

The British antitrust authority is conducting a preliminary review of Microsoft’s interest in OpenAI ahead of a decision on whether to launch a formal merger inquiry.

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Microsoft has pledged $13 billion to the generative AI model maker and received a nonvoting seat on the OpenAI board in the settlement that led to co-founder Sam Altman’s reinstatement as CEO after his brief ouster in November (see: Founder Sam Altman Back as OpenAI CEO Under Revamped Board).

Microsoft and OpenAI have intertwined their futures as the Redmond giant embeds generative AI into Bing search and other products and OpenAI relies exclusively on Microsoft for cloud computing.

The U.K. Competition and Markets Authority on Friday solicited comments on “whether the partnership between Microsoft and OpenAI, including recent developments, has resulted in a relevant merger situation.”

Through an “invitation to comment,” the agency will examine whether the companies’ partnership means Microsoft has material influence or whether it in effect controls more than half of OpenAI voting rights.

Microsoft President Brad Smith was quick to react and took a swipe at the competition, tweeting that 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.”

OpenAI did not immediately respond to a request for comment.

Bloomberg reported that U.S. regulators are also in the preliminary stages of examining the nature of Microsoft’s investment in OpenAI, citing a person familiar with the matter.

OpenAI burst into the mainstream a year ago with the arrival of viral chatbot ChatGPT – which brought natural language processing to complex tasks such as coding.

The U.K. Competition and Markets Authority has already raised concerns about competition in the market for foundation models, which are machine learning trained on vast amounts of data, including OpenAI’s GPT series of models.

In a September report, the CMA raised the possibility of industry consolidation driven by a need for foundational models to be highly effective in a wide range of tasks. These models benefit from scale, including in the number of parameters, the amount of training data and the amount of computing resources.

“Large technology companies’ access to vast amounts of data and resources may allow them to leverage economies of scale, economies of scope, and feedback effects to gain an insurmountable advantage over smaller organizations, making it hard for them to compete,” the CMA said.