UK competition watchdog drops Microsoft-OpenAI probe

The UK's Competition and Markets Authority (CMA) has concluded its investigation into the partnership between Microsoft and ChatGPT maker OpenAI. The CMA had been investigating whether Microsoft's relationship with the globally recognized artificial intelligence (AI) company had changed during the turmoil surrounding the dismissal and subsequent reinstatement of OpenAI CEO Sam Altman. This investigation aimed to determine if the partnership warranted further regulatory scrutiny.

The CMA ultimately determined that, despite Microsoft's multi-billion dollar investment in OpenAI and its exclusive access to certain AI products, the partnership had not undergone a substantial change and therefore did not fall within the scope of UK merger rules. This conclusion implies that Microsoft's influence over OpenAI has not reached a level requiring regulatory intervention at this time. The decision provides clarity on the current state of the collaboration.

Digital rights advocacy group Foxglove stated that the CMA's decision indicates its regulatory capabilities have been "weakened." The organization believes that the CMA's failure to fully scrutinize collaborations between large tech companies could lead to damage to market competition. The CMA launched its investigation in December 2023, following Microsoft's pressure on OpenAI to rehire Altman. This highlights concerns about the potential impact of such partnerships on the broader tech landscape.

CMA Executive Director Joel Bamford stated in a LinkedIn post that Microsoft exerted a "highly material influence" over OpenAI's commercial policies but did not fully control the company. "As a change of control has not taken place, the partnership in its current form does not qualify for review under the UK’s merger control regime." However, he added: "The CMA’s jurisdictional findings should not be interpreted as giving the collaboration a clean bill of health on potential competition concerns; but the UK’s merger control regime must of course operate within the boundaries set by Parliament." This clarifies the scope and limitations of the CMA's decision.

Critics argue that the decision is related to the changing political environment in which the CMA currently operates. The government has instructed the country's regulators to propose measures to stimulate economic growth. In January, the government dismissed then-CMA Chairman Marcus Bokkerink because the government was dissatisfied with his response to this requirement. He was temporarily replaced by former Amazon UK head Doug Gurr. Rosa Curling, co-executive director of Foxglove, stated: "The CMA has been sitting on this decision for well over a year, but within weeks of a former Amazon boss being appointed as chair, it’s decided everything’s fine, nothing to see here." She told the BBC: "It’s a bad sign that Big Tech has managed to persuade the Prime Minister to weaken our competition regulator, allowing Big Tech to swallow up the current generation of cutting-edge tech – just as they did with the last." This raises concerns about the CMA's independence and its ability to effectively regulate large tech companies.

In a series of directives issued in February, the UK government stated that the CMA should prioritize "interventions that promote growth and investment." That same month, the UK sided with the US at a summit in Paris, declining to sign an agreement on artificial intelligence. US Deputy Vice President JD Vance told attendees that over-regulation of artificial intelligence could "strangle a transformative industry that is just getting off the ground." This underscores the government's focus on fostering innovation and economic growth in the AI sector.

Chloe Burkett, a competition lawyer at Farrer & Co, stated: "The CMA will take a less interventionist approach to protecting competition and merger control review, but that does not mean that the CMA will approve every deal submitted to it without question." She added: "The CMA’s purpose is to help maintain competition in the market to ensure consumers get a fair deal." Microsoft said in a statement: "Our partnership with OpenAI and its continued evolution promotes competition, innovation and responsible AI development, and we welcome the CMA’s conclusion, after careful and considered consideration of the commercial realities, to conclude its investigation." This highlights the ongoing debate about the appropriate level of regulation for the rapidly evolving AI industry.