Microsoft Steps Down from OpenAI Board Amid Intensifying AI Regulatory Scrutiny
Microsoft has decided to abandon its plans to take up a non-voting position on the board of ChatGPT creator OpenAI, according to a letter seen by AFP on Wednesday. This move comes as regulatory scrutiny of AI-related deals intensifies globally.
The $13-billion partnership between Microsoft and OpenAI has raised concerns on both sides of the Atlantic about the extent of Microsoft's influence over its smaller partner. Microsoft’s early investment in OpenAI has positioned it as a market leader in artificial intelligence.
When ChatGPT launched in November 2022, it marked a significant milestone in the AI revolution, impressing users with its ability to generate eloquent text in seconds. However, the partnership came under regulatory examination after a failed boardroom coup last year against OpenAI CEO Sam Altman, whom Microsoft supported and briefly hired.
Following the turmoil at OpenAI, Microsoft secured a non-voting observer seat on the board, a position it is now relinquishing. Microsoft's withdrawal is "effective immediately," according to a letter sent from the company to OpenAI on Tuesday.
"Over the past eight months, we have witnessed significant progress by the newly formed board and are confident in the company's direction," the letter stated. "We no longer believe our limited role as an observer is necessary."
Last month, the EU concluded a preliminary examination and determined that Microsoft's investment did not equate to control over OpenAI. However, Brussels is now seeking more information about the agreement to understand whether certain exclusivity clauses could harm competition.
In addition to the EU investigation, Microsoft's ties to OpenAI are also under scrutiny by British competition regulators, and the company faces potential antitrust investigations in the United States.
"It is hard not to conclude that Microsoft's decision has been heavily influenced by the ongoing competition and antitrust scrutiny," said Alex Haffner, a competition lawyer at Fladgate law firm.
Increased Scrutiny Across the Board
Reports indicate that Apple similarly gave up the opportunity to sit on OpenAI's board. Apple, which had partnered with OpenAI to introduce new AI features on its popular devices, was not immediately available for comment.
EU competition chief Margrethe Vestager has put big tech companies on alert regarding their investments in the rapidly growing AI market, emphasizing that the EU will continue to monitor the sector closely.
With regulators focusing on the complex web of relationships that big tech companies have formed with AI providers, Haffner stated that there is a "need for Microsoft and others to carefully consider how they structure these arrangements moving forward."
Another phenomenon under EU scrutiny is "acqui-hires"—where a company acquires another primarily to secure its talent. Brussels is racing to determine if this practice distorts competition.
Earlier this year, Microsoft announced a deal to hire senior figures from OpenAI rival Inflection, including its CEO, to head up a newly created consumer AI unit. Unlike a merger, Inflection continues to operate as an independent company, allowing Microsoft to avoid a traditional merger probe.
Regulators have the authority to block mergers if they believe it will harm competition.
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