CMA invites comments on Microsoft-OpenAI partnership
Regulator investigating the potential of a merger
The UK's Competition and Markets Authority (CMA) is reviewing the partnership between Microsoft and OpenAI, determining the possibility of a merger that could reshape the AI landscape.
The regulator is seeking comments from the two companies and interested third parties, marking the first step in its information gathering process before a formal phase 1 investigation.
The CMA is specifically focusing on whether recent developments in the partnership have led to a potential merger situation, and the potential impact that could have on competition in the UK.
The deadline for comments is set for January 3 2024.
Microsoft has invested billions of dollars in OpenAI, with a 49 per cent stake in OpenAI's for-profit arm.
The partnership has evolved over the years, including a $1bn investment in 2019 and an additional $10bn this year, establishing Azure as OpenAI's exclusive cloud partner.
However, the two companies have not fully disclosed the details of their alliance.
Recent events surrounding OpenAI CEO and co-founder Sam Altman further complicated the partnership.
Last month, Altman was fired from OpenAI, leading to discussions with Microsoft CEO Satya Nadella. Altman was on the verge of joining Microsoft to lead an advanced AI research team, but ultimately decided to return to OpenAI as CEO.
Over 700 OpenAI employees reportedly threatened to leave if Altman was not reinstated.
The saga of Altman's firing and return prompted a restructuring of the OpenAI board, with Microsoft securing a non-voting seat. While Microsoft's representative can attend board meetings and access confidential information, they are barred from participating in crucial decisions such as the election or selection of directors.
The CMA will examine whether recent moves by the two companies have led to a "relevant merger situation." The term indicates a level of closeness between two companies that could impact competition, even if one has not acquired the other.
Microsoft utilises OpenAI technology in products like Bing and Copilot, adding another layer to the examination. The CMA will likely consider factors such as the distinctiveness of the companies and how revenue is earned, which are crucial elements in determining the impact of the partnership on competition.
"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," Sorcha O'Carroll, senior director for mergers at the CMA, said.
Microsoft president Brad Smith highlighted the longstanding partnership between the two companies, dating back to 2019.
"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.
Smith highlighted that the recent changes merely involve Microsoft gaining a non-voting observer position, distinguishing it from Google's acquisition of DeepMind in 2014.
The CMA's review aligns with the regulator's broader examination of the implications of foundation models (FMs) for competition and consumer protection, with an update scheduled for March 2024.
Simultaneously, the CMA is moving forward with its investigation into the UK's cloud infrastructure market, to address potential competition concerns and explore interventions that can enhance the supply of these services for UK customers.