Microsoft resigns as observer on OpenAI board to avoid antitrust scrutiny Author: Reuters

By Foo Yun Chee

BRUSSELS (Reuters) – Microsoft has resigned from an observer position on OpenAI’s board, a move aimed at allaying concerns from U.S. and British competition regulators about the scope of Microsoft’s control over the artificial intelligence startup amid the growing popularity of generative AI.

However, a source at the agency said on Wednesday that the move is unlikely to allay concerns from the U.S. Federal Trade Commission, which is conducting an antitrust investigation into deals between big tech companies and leading artificial intelligence firms.

Meanwhile, Apple (NASDAQ:) , which last month said it was bringing OpenAI’s ChatGPT chatbot to its devices, will not take an observer role on OpenAI’s board, despite being widely expected to do so, the Financial Times reported, citing a person with direct knowledge of the matter. Apple did not respond to a request for comment.

An OpenAI spokesperson said the company will be taking a new approach to stakeholder engagement, holding regular meetings with strategic partners like Microsoft (NASDAQ:) and Apple, and investors like Thrive Capital and Khosla Ventures.

In November, after OpenAI CEO Sam Altman took over the reins of the company again, Microsoft took a non-voting observer position on the OpenAI board.

This position meant Microsoft could attend OpenAI board meetings and have access to confidential information, but had no say in 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 the European Union, the UK and the US about the extent of control the company exerts over OpenAI.

As Microsoft said in a July 9 letter to OpenAI, this position allowed for insight into the board’s work without compromising its independence.

The company cited new partnerships, innovation and a growing customer base since Altman returned to the startup as reasons for stepping down as an observer.

“Over the past eight months, we have witnessed significant progress from our newly formed management team and we are confident in the direction the company is headed. Given all of this, we no longer believe our limited observer role is necessary,” the letter said.

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 is making a smart move to give up the only tangible evidence of its potential control over OpenAI, making it harder for antitrust regulators on both sides of the Atlantic to prove otherwise, said an antitrust lawyer who spoke on condition of anonymity due to the sensitivity of the matter.

The UK Competition and Markets Authority declined to comment.

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.