Competition and Markets Authority looks into Microsoft/OpenAI after Altman fiasco

The Competition and Markets Authority (CMA) has begun looking at whether Microsoft’s relationship with OpenAI is anti-competitive.

At the start of 2023, Microsoft injected $10bn of funding into OpenAI, the developer of ChatGPT. The funding and support, which provided OpenAI with cloud hosting for its foundational AI models (FMs) on Microsoft’s Azure public cloud, has enabled Microsoft to develop a lead in large language models (LLMs).

At the end of November, Microsoft appeared to have muddied the formal agreement with OpenAI after ousting the company’s CEO, Sam Altman. Microsoft CEO Satya Nadella then hired Altman and offered to hire and match the existing salaries of the majority of OpenAI staff who were disgruntled by the circumstances around the departure of their boss. Within days, Altman was rehired by OpenAI and Microsoft said it was committed to supporting the company.

The CMA will be looking at whether these recent developments have resulted in a relevant merger situation and, if so, the impact the merger could have on competition in the UK.

The CMA has been closely monitoring the impact of partnerships and strategic agreements that could result in a weakening of competition in the development or use of FMs. The authority believes the partnership between Microsoft and OpenAI represents a close, multi-faceted relationship between two firms with significant activities in FMs and related markets.

The CMA said it would be reviewing whether the partnership has resulted in an acquisition of control – that is, where it results in one party having material influence, de facto control or more than 50% of the voting rights over another entity – or change in the nature of control by one entity over another.

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 one investigation, which would only happen once the CMA has received the information it needs from the partnership parties.”

Along with looking at the relationship between Microsoft and OpenAI, the CMA has also been investigating the wider implications of FMs for competition and consumer protection. It plans to publish an update on that work in March 2024, which will cover, among other areas, the ability for FM developers to gain access to data and computing power, and investments, mergers, acquisitions and partnerships.

The CMA is also currently looking at the cloud infrastructure market to see if there are competition concerns and, if so, what interventions could improve the supply of these services for UK customers.