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Microsoft-OpenAI partnership under scrutiny from UK regulator

Published Dec 08, 2023 22:39 Updated Dec 08, 2023 23:00
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British regulator the Competition and Markets Authority (CMA) has opened an inquiry into Microsoft Corporation (NASDAQ:MSFT)’s partnership with ChatGPT creator OpenAI over fears of consumer protection and competition risk.

An invitation for comment asks for input from Microsoft, OpenAI and interested third parties on the two firms’ close partnership to determine the potential impact on competition in the UK artificial intelligence sector.

Chief among the CMA’s concerns is the need for “sustained competition between AI developers which will help to deliver innovation, growth and responsible practices across the sector”.

“The speed at which artificial intelligence (AI) is scaling across use cases and markets is unrivalled in economic history, while advances in powerful foundation models (FMs) mean that this is a pivotal moment in the development of this transformative technology,” said the regulator.

Microsoft was an early backer of OpenAI, having invested $10 billion into the company, which was founded by Sam Altman and Elon Musk as a non-profit in 2015.

OpenAI has since garnered an estimated $86 billion valuation, with Microsft owning a 49% stake in the group.

Microsoft also has a profit-sharing agreement with OpenAI and preferential access to its technology.

Now, the CMA wants to determine whether Microsoft’s investment has “resulted in the creation of a relevant merger situation” under the merger provisions of the Enterprise Act.

If so, the CMA wants to determine “whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services”.

The regulator is also scrutinising the circus surrounding Sam Altman’s position in the company, in which Altman was fired by the OpenAI board, hired by Microsoft, and then rehired by the OpenAI board all in the space of a few days in late November.

The power struggle led to the ousting and replacement of numerous board members, with Microsoft poised to take a non-voting position following the debacle.

Sorcha O’Carroll, senior director for mergers at the CMA said: “The invitation to comment is the first part of the CMA’s information-gathering process and comes in advance of launching any phase 1 investigation, which would only happen once the CMA has received the information it needs from the partnership parties.”

Participants have until 3 January 2024 to place their comments.

Read more on Proactive Investors AU

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Microsoft-OpenAI partnership under scrutiny from UK regulator
 

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