U.K.’s competition authority says Microsoft’s OpenAI partnership doesn’t qualify for investigation

CMA says Microsoft's OpenAI role isn't a control change under U.K. law.

: The Competition and Markets Authority has determined that Microsoft's investment in OpenAI does not constitute a change of control under U.K. merger law. Despite Microsoft's $14 billion investment and previous exclusive cloud provider role, recent developments have lessened its influence over OpenAI. Microsoft's decision against taking a board role and renegotiated agreements in cloud computing were factors in the CMA's decision. The CMA concluded there is no substantial lessening of AI competition in the U.K.

The U.K.'s Competition and Markets Authority (CMA) has concluded that Microsoft's substantial investments in OpenAI do not create the criteria for an investigation under the merger provisions of the Enterprise Act 2002. After pouring nearly $14 billion into OpenAI and collaborating closely on projects like Azure OpenAI Service and GitHub Copilot, Microsoft doesn't exert enough control according to the CMA's findings. The decision considered the level of material influence Microsoft has over OpenAI's commercial policy. "Overall, taking into account all of the available evidence […] the CMA does not believe that Microsoft currently controls OpenAI’s commercial policy," the CMA noted in its announcement.

The investigation into Microsoft's partnership with OpenAI began in December 2023, focusing on the potential for decreased competition within the AI market. A primary concern was Microsoft’s influence in securing the re-appointment of OpenAI CEO Sam Altman in November 2023, potentially leading to a "substantial lessening" of competition. "[A]n increase in Microsoft’s control over OpenAI could give rise to potential competition concerns," the CMA written statement indicated. Access to OpenAI's AI models could be critical in markets where Microsoft holds a strong position.

Over the course of the investigation, several changes potentially reduced Microsoft’s influence over OpenAI. In January, the partnership framework evolved, granting Microsoft "first right of refusal" for certain workloads rather than exclusive cloud services. OpenAI received waivers to expand its computing needs, illustrated by a notable $500 billion deal involving a U.S. data center facilitated through investor SoftBank.

Microsoft has also altered its strategic positioning by retracting its pursuit of a board role at OpenAI. Such a move might have raised further regulatory scrutiny, hence the shift in dynamics during the regulatory probe. "Material aspects of the [Microsoft] partnership have been changing over the course of the investigation," the CMA documented, underscoring the lack of a definitive line differentiating material influence and de facto control.

Despite the CMA's stringent examination of tech sector AI investments, exemplified by their previous clearance of Google parent Alphabet’s activities with OpenAI competitor Anthropic, no findings have so far substantiated anticompetitive practices. The agency’s proactive stance reflects broader efforts to curb consolidation in emerging AI markets yet acknowledges the absence of infringing conduct.

Sources: Competition and Markets Authority, TechCrunch, Financial Times

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