Microsoft drops board observer seat at OpenAI amid antitrust scrutiny

Onwubuke Melvin
Onwubuke Melvin

Alex Omenye

In a strategic move aimed at allaying antitrust concerns from regulators in the U.S. and UK, Microsoft has voluntarily stepped down from its board observer role at OpenAI.

This decision comes amidst mounting regulatory scrutiny over the tech giant’s influence on the AI startup, particularly in the realm of generative artificial intelligence.

The shift, however, may not fully resolve concerns within the U.S. Federal Trade Commission (FTC), according to an insider familiar with the matter. The FTC, actively reviewing antitrust implications of deals involving major tech firms and AI leaders, continues to monitor the situation closely.

A source within the FTC indicated that Microsoft’s move reflects a proactive approach to anticipated antitrust exposure. Meanwhile, Microsoft declined to comment immediately on the development.

Apple, which recently announced plans to integrate OpenAI’s ChatGPT on its devices, will not be taking a board observer position at OpenAI, contrary to prior expectations, as confirmed by a knowledgeable source. There are no foreseeable plans for OpenAI to extend observer roles to other entities. Apple did not respond to requests for comment on this matter.

OpenAI itself plans to adopt a new approach to engagement, including regular meetings with strategic partners like Microsoft and Apple, as well as with key investors.

Microsoft had secured a non-voting observer seat on OpenAI’s board last November, coinciding with CEO Sam Altman’s return to the helm. This position allowed Microsoft access to board meetings and confidential information but excluded voting rights on critical matters.

The board observer seat, coupled with Microsoft’s substantial $10 billion investment in OpenAI, triggered concerns among antitrust watchdogs in the EU, UK, and the U.S., who scrutinized the extent of Microsoft’s control over OpenAI.

In a letter dated July 9 to OpenAI, Microsoft highlighted the startup’s progress under Altman’s leadership, citing new partnerships, innovations, and a growing customer base as factors behind its decision to relinquish the observer role.

While EU regulators recently cleared the partnership under non-merger rules, focusing instead on exclusivity clauses, British and U.S. regulators continue to probe the relationship between Microsoft and OpenAI, particularly regarding the latter’s independence.

Antitrust experts such as Bill Baer view Microsoft’s move as a prudent step amid the heightened risk of concurrent antitrust investigations. Baer suggested that concerns extend beyond board governance issues.

In the view of an anonymous antitrust lawyer, Microsoft’s decision effectively eliminates tangible evidence of undue influence over OpenAI, complicating regulators’ efforts to prove control.

Both Microsoft and OpenAI are intensifying efforts to market AI technologies to corporate clients, demonstrating operational independence to assuage regulatory concerns.

Furthermore, Microsoft is expanding its AI offerings on the Azure platform and recently appointed a new CEO to lead its consumer AI division, signaling diversification beyond its relationship with OpenAI.

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