Microsoft and Apple resigned from their board observers seats at OpenAI to quell global regulators’ concern over the close relationship between big tech companies and a few powerful AI start ups.
Microsoft, less than nine months after assuming the role of ChatGPT, which they have backed with 13 billion dollars, has sent a letter to the maker of the ChatGPT app, stating that its resignation is “effective immediately”.
Apple, who announced recently a partnership to integrate OpenAI’s chatbots in its products, won’t take its planned seat.
OpenAI, Anthropic, and Mistral are among the top AI businesses in the world. They have strong links with tech giants who have invested billions of dollars to support them.
These relationships, say watchdogs, could cement Silicon Valley’s dominance in the field of transformative technology. They fear that this will stifle competition and increase their power.
Last December, the UK’s Competition Authority expressed its concerns about the rapid development of AI. It said that the “development of AI is unrivalled in the economic history”. They also called competition between developers as “critical” for “guiding the market development toward positive outcomes” for both people and businesses.
The Competition and Markets Authority is evaluating whether Microsoft’s partnership between OpenAI and Microsoft could be considered as a merger. A similar tie-up, which includes Amazon and Anthropic, may also be considered. The CMA has asked for comments in advance of a possible preliminary investigation.
The regulator will examine the “multi-year multi-billion-dollar investment, collaboration in tech development, and exclusive provisioning of cloud services by Microsoft for OpenAI”, and whether this partnership indicates that Microsoft has a material influence on the business.
Microsoft hopes that by dropping its board seat it will resolve one of the major issues raised about the investment.
While the European Commission has also examined the deal, and concluded that the observer’s seat did not affect OpenAI’s independence nor Microsoft’s influence over OpenAI it is still considering a antitrust investigation.
The Federal Trade Commission in the US is looking at the impact on competition of partnerships and investments between large tech companies and AI-generative start-ups.
OpenAI experienced a turbulent period last November when its CEO, Sam Altman was terminated and then rehired in the span of one weekend over a disagreement over the strategic direction for the company.
Microsoft has taken up an observer position on the board following the turmoil. Many were surprised that Microsoft did not have a board, given its size and importance in the business.
Microsoft stated in the letter: “We accepted a non-voting observer board role during a period when OpenAI was rebuilding its board. This position allowed for a better understanding of the board’s work during its transitional phase without compromising their independence.
Microsoft stated that it is “confident” in the direction of the company and therefore “we do not believe our limited role as observers is necessary”.
Alex Haffner is a partner in Fladgate’s competition department. He said that it was hard to not conclude that Microsoft made its decision because of the competition scrutiny being conducted on the influence Microsoft (and other tech giants) have over new AI players like Open AI.
Microsoft and other companies should carefully consider the structure of these arrangements.
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