Microsoft and Apple, amidst growing regulatory scrutiny, have stepped down from their board observer roles at OpenAI to address mounting concerns over the influence of major tech companies on AI start-ups.
Microsoft, which has heavily invested $13 billion in OpenAI, notified the ChatGPT maker that its resignation was ‘effective immediately’. This decision comes less than nine months after Microsoft assumed the role. Similarly, Apple, which had recently announced a partnership to integrate OpenAI’s chatbots into its products, indicated it would no longer pursue its planned board seat.
Major generative AI companies, such as OpenAI, Anthropic, and Mistral, are closely linked with tech giants who have funded them with substantial investments. Regulators express concerns that these alliances might further Silicon Valley’s dominance over AI technology, potentially stifling competition and amplifying the power of these large corporations.
In December of last year, the UK’s Competition and Markets Authority (CMA) raised concerns about the unparalleled economic significance of AI developments, emphasising the necessity of competition among developers to ensure beneficial market outcomes for both people and businesses. The CMA is currently evaluating whether Microsoft’s partnership with OpenAI could be classified as a merger, akin to Amazon’s association with Anthropic. Public comments have been invited in anticipation of a potential preliminary investigation. The regulatory body is examining the ‘multi-year, multi-billion dollar investment, collaboration in technology development, and exclusive provision of cloud services by Microsoft to OpenAI’ to determine if Microsoft possesses material influence over the business.
By relinquishing its board seat, Microsoft aims to address key regulatory concerns linked to its investment. The European Commission also reviewed the arrangement, concluding that the observer role did not impact OpenAI’s independence or Microsoft’s influence over the company, though it continues to contemplate an antitrust review. Meanwhile, in the US, the Federal Trade Commission is investigating the competitive ramifications of partnerships between large tech firms and generative AI start-ups.
Microsoft’s decision follows significant turmoil at OpenAI last November, when CEO Sam Altman was dismissed and reinstated over a weekend amid a contentious debate regarding the company’s strategic direction. Microsoft then took an observer role on the board during this period of upheaval. Considering its substantial investment, many were surprised that Microsoft did not already possess a formal seat.
In a correspondence, Microsoft explained, ‘We accepted the non-voting board observer role at a time when OpenAI was in the process of rebuilding its board. This position provided insights into the board’s transitional work without compromising its independence’. With a new board now established, Microsoft expressed confidence in OpenAI’s trajectory and concluded that its ‘limited role as an observer is no longer necessary’.
Alex Haffner, a competition partner at Fladgate, commented, ‘It is hard not to conclude that Microsoft’s decision has been heavily influenced by the ongoing competition scrutiny of its (and other major tech players’) influence over emerging AI players such as OpenAI. It is clear that regulators are very much focused on the complex web of inter-relationships that big tech has created with AI providers, hence the need for Microsoft and others to carefully consider how they structure these arrangements’.
The resignations by Microsoft and Apple from their OpenAI board observer roles underscore the intense regulatory scrutiny facing big tech companies. As regulators continue to monitor and evaluate the implications of these alliances, the landscape of AI development remains under close watch to ensure competitive and equitable outcomes for the broader market.
