Microsoft resigns as observer on OpenAI board amid regulatory scrutiny

By Foo Yun Chee

BRUSSELS (Reuters) – Microsoft has resigned from an observer seat on the board of OpenAI, which has come under scrutiny from regulators on both sides of the Atlantic. The company said it was unnecessary after the artificial intelligence start-up’s governance improved significantly over the past eight months.

iPhone maker Apple was also expected to take an observer role on OpenAI’s board but did not do so, the Financial Times reported, citing a person with direct knowledge of the matter. Apple did not respond to a request for comment.

Microsoft took a non-voting observer position on OpenAI’s board last November, after OpenAI CEO Sam Altman took back the helm of the company, which operates the generative AI chatbot ChatGPT.

This position allowed participation in OpenAI board meetings and access to confidential information, but did not provide voting rights on matters such as selecting or recommending directors.

Microsoft’s observer status and investment in OpenAI of over $10 billion have raised concerns among competition authorities in Europe, the UK and the US about the extent of control the company exerts over OpenAI.

Microsoft emphasized that OpenAI’s new partnerships, innovation, and growing customer base since Altman returned to the startup were the reasons for relinquishing his spot as an observer.

“We have seen significant progress from our newly formed board over the past eight months and are confident in the direction the company is headed. Given all of this, we no longer believe our limited observer role is necessary,” the company wrote in a July 9 letter to OpenAI.

EU antitrust regulators said last month that the partnership would not be subject to EU merger rules because Microsoft does not control OpenAI. Instead, they will seek advice from third parties on exclusivity clauses in the deal.

Meanwhile, British and American competition authorities continue to have concerns and questions about Microsoft’s influence on OpenAI and the latter’s independence.

Microsoft and OpenAI are increasingly competing to sell AI technology to enterprise customers, both aiming to generate revenue and demonstrate their independence to regulators amid antitrust concerns.

Additionally, Microsoft is expanding its AI offerings on Azure and has hired the CEO of Inflection to lead its consumer AI business, a move widely seen as an attempt to diversify beyond OpenAI.

(Reporting by Foo Yun Chee; Additional reporting by Krystal Hu and Jeffrey Dastin in San Francisco and Nilutpal Timsina in Bengaluru; Editing by Jamie Freed and Miral Fahmy)