Justin Sullivan
Microsoft’s (NASDAQ:MSFT) partnership with ChatGPT-developer OpenAI is getting some regulatory scrutiny.
On Friday, the UK’s Competition and Markets Authority said it was seeking comments from interested third parties on the partnership between Redmond, Wa.-based Microsoft (MSFT) and OpenAI.
“The CMA is today providing an early opportunity for the parties and interested third parties to comment on whether the partnership between Microsoft (MSFT) and OpenAI, including recent developments, has resulted in a relevant merger situation and, if so, the impact that the merger could have on competition in the UK,” the regulator said in a statement.
“The Invitation to Comment (ITC) is the first part of the CMA’s information gathering process and comes in advance of any launch of a formal phase 1 investigation,” the CMA added.
Microsoft Vice President Brad Smith said it would work with the CMA on the inquiry.
“Since 2019, we’ve forged a partnership with OpenAI that has fostered more AI innovation and competition, while preserving independence for both companies,” Smith said in a statement to Seeking Alpha. “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. We will work closely with the CMA to provide all the information it needs.”
“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 share of profit distributions,” Microsoft Chief Communications Officer Frank Shaw said in a separate statement to Seeking Alpha.
The move by the antitrust regulator is the second time it has weighed in on Microsoft’s (MSFT) actions this year. The CMA blocked the tech giant’s $69B acquisition of videogame publisher Activision Blizzard, eventually relenting after amendments to the deal.
The company in January this year announced a “multiyear, multibillion dollar investment” in OpenAI. Reports said the size of the investment was $10B.
“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% of the voting rights over another entity – or change in the nature of control by one entity over another,” the antitrust regulator said.
The CMA also pointed to recent “number of developments in the governance of OpenAI,” no doubt referring to the dramatic firing of the artificial intelligence firm’s CEO Sam Altman in November and his eventual return.
“The speed at which artificial intelligence is scaling across use cases and markets is unrivaled in economic history, while advances in powerful foundation models (FMs) mean that this is a pivotal moment in the development of this transformative technology,” the CMA weighed in.
Following the news of the CMA’s inquiry into the deal, the U.S. Federal Trade Commission has made preliminary antitrust queries into the deal, Bloomberg reported, citing a person familiar with the matter. No formal probe has been opened yet, the person added.
(This story has been updated to reflect Microsoft’s comment.)