Technology

Microsoft’s investment in OpenAI faces initial review from UK competition regulator

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The U.K.’s competition watchdog has opened an initial review into Microsoft’s mammoth investment into ChatGPT-creator OpenAI, making it the first major regulator to flag potential competition concerns over the tech giant’s relationship with one of the most important AI companies today.

The Competition and Markets Authority said in a statement Friday that it is seeking views from interested parties to address whether Microsoft’s $10 billion investment in OpenAI has led to a “relevant merger situation,” where two or more businesses have ceased or will cease to be distinct as a result of a transaction.

The CMA said the pace at which AI is scaling is “unrivalled in economic history,” and that advances in so-called foundation models, which describe general purpose AI tools such as ChatGPT, represent a “pivotal moment in the development of this transformative technology.”

The regulator said it will review whether Microsoft’s partnership with OpenAI has resulted in an acquisition of control – in other words, a situation where one company has material influence, de facto control, or more than 50% of the voting rights over another entity.

“The invitation to comment is the first part of the CMA’s information gathering process and comes in advance of launching any phase 1 investigation, which would only happen once the CMA has received the information it needs from the partnership parties,” Sorcha O’Carroll, senior director for mergers at the CMA, said in a statement.

Microsoft President and Vice Chair Brad Smith, responding to the CMA’s statement, called out Google’s 2014 acquisition of British AI lab DeepMind, saying that Microsoft’s partnership with OpenAI is unlike that deal.

“Since 2019, we’ve forged a partnership with OpenAI that has fostered more AI innovation and competition, while preserving independence for both companies,” Microsoft’s Smith said in the statement Friday.

“The only thing that has changed is that Microsoft will now have a non-voting observer on OpenAI’s Board, which is very different from an acquisition such as Google’s purchase of DeepMind in the UK. We will work closely with the CMA to provide all the information it needs.”

Separately, the CMA is reviewing the AI industry to assess what risks and opportunities foundation models present, and what principles need to be applied to the tech to prevent competition and consumer protection breaches. The European Union is also expected to agree on landmark rules designed to regulate AI technology later Friday.

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