What you need to know
- The UK Competition and Markets Authority has invited comments on the partnership between OpenAI and Microsoft.
- Microsoft and OpenAI have a complex relationship, including Microsoft investing billions of dollars in OpenAI and having a 49 percent stake in OpenAI's for-profit arm.
- OpenAI CEO and co-founder Sam Altman almost joined Microsoft to lead a new advanced AI research team but ultimately returned to OpenAI.
- The saga surrounding Altman's firing from OpenAI and later return resulted in OpenAI having a restructured board that includes a non-voting seat held by Microsoft.
The UK Competition and Markets Authority (CMA) is looking into the partnership between OpenAI and Microsoft. The CMA shared that it is "providing an early opportunity for the parties and interested third parties to comment on whether the partnership... has resulted in a relevant merger situation" in a statement. This is the first stage of the governing body's information gathering process. This part of the process comes before any formal investigation.
Specifically, the CMA will look into whether Microsoft and OpenAI's recent moves have resulted in a "relevant merger." A relevant merger is a complicated term with several components, but in essence, it is what happens when two companies become so close that their relationship affects competition even though one company has not acquired the other.
Microsoft President Brad Smith shared the following on Microsoft's relationship with OpenAI:
"Since 2019, we’ve forged a partnership with OpenAI that has fostered more AI innovation and competition, while preserving independence for both companies. 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."
Microsoft and OpenAI
Microsoft and OpenAI have been close for years. Microsoft invested $1 billion into OpenAI in 2019. Earlier this year, Microsoft invested an additional $10 billion in OpenAI, according to several reports. The same partnership that saw Microsoft invest billions in OpenAI this year made Azure the exclusive cloud partner of OpenAI.
It's not just the fact that Microsoft has a 49% stake in the for-profit arm of OpenAI that makes the two companies close. OpenAI co-founder and CEO Sam Altman almost swapped from OpenAI to Microsoft just last month. OpenAI's board fired Altman in a shocking move that led to chaos.
Late into several nights and over the ensuing weekend, Microsoft CEO Satya Nadella, Altman, and OpenAI's leadership held talks. At one point, Altman was set to lead a newly formed advanced AI research team at Microsoft. That, however, never transpired as Altman decided to return to OpenAI as CEO.
Complicating matters further, over 700 OpenAI employees threatened to leave the company if Altman was not reinstated, and it was made clear that every single one of them would have a place at Microsoft if they decided to leave. Again, things never went that far as Altman returned to OpenAI, but it shows the complexity of the relationship between Microsoft and OpenAI.
The drama surrounding Altman's sudden firing and return to OpenAI also resulted in Microsoft having a non-voting seat on OpenAI's board.
The fact that Microsoft uses OpenAI tech in Bing and Copilot is also important. A factor in determining if a relevant merger has occurred is how distinct companies are and how revenue is earned by each organization.
This is an ongoing story, and we will update it as more information becomes available.
