The dizzying management drama at OpenAI last month concluded with the reinstatement of co-founder Sam Altman a week after his surprise firing, and a much larger role for Microsoft, which ended up with a board seat for the first time since investing. billions in the company. start at the beginning of this year. That new, more welcoming relationship is now the focus of new research launched today by the UK Competition and Markets Authority (CMA) on whether the two companies are now effectively in a “relevant merger situation”.
The first part of the process is today's announcement of CMA's interest and a formal “invitation to comment”, which is open to both companies and interested third parties. Anyone can provide comments for the CMA to consider as it considers what steps it might take next, if any.
“The invitation to comment is the first part of the CMA's information gathering process and occurs before the launch of any Phase 1 investigation, which would only happen once the CMA has received the information it needs from associated parties. “said Sorcha O'Carroll. , Senior Director of Mergers at the CMA, in a statement. Meanwhile, the investigation is going through several stages which could result in the CMA taking action to disengage the couple.
“Relevant merger situation” is a specific regulatory term that forms an interesting umbrella for a variety of relationships. It is intended to take into account situations where one company is not directly purchased or merged with another, but the relationship between the two parties effectively affects competition for the rest of the market.
The CMA points out that “a A range of different types of transactions and agreements may constitute a relevant merger situation”, which may include minority shareholdings and commercial agreements.
Both, of course, exist in the relationship between Microsoft and OpenAI. Microsoft not only made a huge investment worth billions in OpenAI last year, giving it just under 50% of the business. But the two work very closely on developing a range of ai services, including several that incorporate ai-services/openai/overview” target=”_blank” rel=”noopener”>Microsoft's Azure cloud platform.
If ai has been a moving target, it's one that has very prominently featured Microsoft and OpenAI as two of the strongest and most accurate darts. OpenAI has been setting the pace for the creation of LLMs and services built using those LLMs. Microsoft has supported it financially but also operationally. And Microsoft played a pivotal role in the last month of turmoil, which appears to have been the latest move to draw the CMA's attention.
“There have recently been a number of developments in OpenAI governance, some of which involved Microsoft,” he noted today.
Although OpenAI has never fully revealed what led to the firing of Altman and his co-founder Greg Brockman, Microsoft wasted no time in offering them both prominent jobs at its company, along with jobs to any other OpenAI employees who wanted to leave the startup in protest. When Altman and Brockman were reinstated, it was a victory lap for all of them: Microsoft ended up with a board seat for the first time, yes, as a non-voting observer, but still at the table.
“The speed at which artificial intelligence (ai) is scaling across use cases and markets is unrivaled in economic history, while advances in powerful foundation models (FM) mean this is a pivotal moment in the development of this transformative technology,” the CMA writes. Basically, the regulator is concerned that in these early days, a handful of companies are hindering competition in the construction and operation of these basic models. “The partnership between Microsoft and OpenAI – which includes a multi-year, multi-million dollar investment, technology development collaboration, and exclusive provision of cloud services by Microsoft to OpenAI – represents a close, multifaceted relationship between two companies with significant FM activities. and related markets,” he added.
There are a number of other criteria that must be met to be considered part of a relevant merger situation, as defined in the country's Companies Law. If the CMA conducts this as a full-fledged investigation, these points will inevitably arise. They will include questions about whether the two businesses (in this case, in the area of ai) are sufficiently different; how much revenue is generated through your relationship (there is a revenue target of £70 million); and whether it can be argued that they represent more than 25% of the market for the product in question. These are all points that I imagine both sides would argue either exist or do not exist.
One line of thinking here is that, regardless of whether this turns into a full investigation of the Microsoft/OpenAI partnership under relevant merger rules, it gives the CMA a moment to shed light on this relationship and the activities of both companies. Since both are so prominent in the ai space, that in turn could serve to give the newspaper a basis for considering developments in the future.
“Today's announcement by the CMA that it is considering investigating the Microsoft/Open ai partnership under its merger control powers is particularly interesting given the broader concerns about ai regulation,” said Alex Haffner, competition partner at the British law firm Fladgate, in a statement. “To move forward with any investigation, the CMA will need to find evidence that the recent fallout from the Sam Altman affair has led to material changes to the governance of Open ai and, more specifically, to Microsoft's influence over its affairs. However, even if it does not pursue the matter further, by opening a preliminary investigation the CMA will be able to better understand the scope of the governance arrangements underpinning the Open ai project and therefore better inform its broader oversight of the IT sector. Rapidly developing ai. “
