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Microsoft Distances Itself from OpenAI: Ditches Board Seat as Show of Independence

Last Updated 14 seconds ago
James Morales
Last Updated 14 seconds ago

Key Takeaways

  • Microsoft has vacated its seat on OpenAI’s board.
  • Apple has also ditched plans to join the board as a non-voting member.
  • The changes to OpenAI’s board come as the company’s relationship with Big Tech firms is under rising scrutiny.

According to critics of the deal, Microsoft’s $13 billion investment in OpenAI amounts to a corporate takeover in all but name, completing the AI company’s transformation from a scrappy startup and open-source champion to part of the Big Tech establishment. 

But in an apparent bid to prove that narrative wrong, Microsoft has given up its seat on OpenAI’s board, where it has served as a non-voting observer since November.  

OpenAI Board Responds to Regulatory Scrutiny

Microsoft originally took a set on the board of OpenAI in November amid the controversy surrounding the departure and subsequent reinstatement of CEO Sam Altman. 

Depicting its role as that of a steward overseeing the AI developer’s transition to a new governance model, Microsoft said : “Over the past eight months we have witnessed significant progress by the newly formed board and are confident in the company’s direction. Given all of this we no longer believe our limited role as an observer is necessary.”

However, many observers have speculated that there is another reason for Microsoft’s departure—rising scrutiny of its partnership with OpenAI among global regulators.

Antitrust Investigations

Since December 2023, authorities in the EU, UK and US have all opened antitrust investigations into Microsoft’s investment in OpenAI over concerns that it may violate competition rules. 

Two questions sit at the heart of these probes. Firstly, is the deal really a merger in disguise? In which case the two companies illegally skirted the necessary regulatory approvals. And secondly, does the integration of OpenAI’s machine learning models with Microsoft’s platforms amount to an abuse of the latter’s dominant market position? 

In the EU, the first question was nullified by the decision to drop a formal merger inquiry  in April. But the matter of potential market abuse remains very much in play. 

Because Microsft is categorized as a “gatekeeper” under the EU’s Digital Markets Act (DMA), its platforms are subject to enhanced oversight. 

During a speech  in June, the European Commissioner for Competition Margrethe Vestager said Big Tech monopolies posed a “major risk” to competition in the AI market. “This could lead to practices like tying and bundling by dominant firms, blocking AI competitors from accessing essential resources, and preventing customers from switching,” she warned.

To that end, she said the European Commission had requested information on the agreement between Microsoft and OpenAI, “to understand whether certain exclusivity clauses could have a negative effect on competitors.”

Incidentally, a recent agreement between OpenAI and Apple has also sparked antitrust concerns. Until recently, Apple was on course to join Microsoft as an observer on OpenAI’s board. But those plans have now also been scrapped. 

Who Sits on OpenAI’s Board?

With two of its most important commercial partners now relegated to the sidelines, OpenAI’s board currently consists of 8 individuals responsible for overseeing the organization.

Following a major shake-up in the aftermath of November’s events, the board is currently chaired by former Facebook CTO Bret Taylor. Other members include Altman, Adam D’Angelo, Dr. Sue Desmond-Hellmann, Paul M. Nakasone, Nicole Seligman, Fidji Simo, and Larry Summers.

However, whether Microsoft’s withdrawal from the board will impact ongoing antitrust probes remains to be seen. Although it certainly sends a message that OpenAI is independent, with its governance framework isolated from its commercial relationship with Microsoft, the terms of the arrangement between the two firms remain under investigation. 

Ultimately, it is that agreement that antitrust authorities have their sights on, not just the makeup of OpenAI’s board.

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