UK regulator CMA to scrutinize Microsoft and OpenAI tie-up for Relevant Merger

The recent controversies at OpenAI have lead to a larger role for Microsoft, with a seat on the board. This new relationship is now under scrutiny by the Competition and Markets Authority (CMA) in the U.K. Over whether the two companies are effectively in a “relevant merger situation,” which has launched a new inquiry.

This newly opened “Invitation to Comment” process is the first step in the CMA’s information gathering journey, open to both companies and third parties to provide feedback. From there, the CMA would consider launching a phase 1 investigation, to receive the needed information from both parties.

Even though Microsoft did not outright purchase OpenAI, the CMA investigates if the relationship between the two companies impacts competition in the market. Commercial arrangements and minority shareholding, which are evident in the Microsoft-OpenAI relationship, fall under the CMA’s investigation.

With Microsoft holding nearly 50% of OpenAI after a substantial investment and working closely to develop AI services, including with Microsoft’s Azure cloud platform. The CMA’s attention has been piqued after the management drama at OpenAI, as Microsoft played a pivotal role in reinstating Sam Altman and his co-founder. Altman and Brockman were offered prominent jobs at Microsoft. The rapid involvement of Microsoft with OpenAI has triggered the CMA’s attention specifically in shaping over the industry’s future development.

The CMA is concerned with a monopolistic early market in foundational AI models. This relationship could lead to a wider, ongoing investigation and shed light on the activities of both companies. A competitive landscape is vital in the early stages of the AI industry development.

The CMA’s preliminary investigation will allow them to better understand the governance arrangements of the OpenAI project. This will provide the CMA with a broader oversight of the fast-developing AI sector. If the CMA does not proceed with matters further, the preliminary investigation will at least provide a clearer understanding of the influence Microsoft holds over OpenAI.

In conclusion, by initiating the preliminary investigation, the CMA will have better oversight of the governance of the OpenAI project, and better inform its broader oversight of the fast-developing AI sector. The relationship between Microsoft and OpenAI, due to its multi-faceted nature, has piqued the attention of the CMA, sparking a preliminary investigation. The results of which will provide crucial information on the likely future direction of investigations and will serve to provide a clearer picture of the governance of OpenAI.

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