UK CMA and US FTC Are Investigating Microsoft’s Partnership with OpenAI (UPDATED)

The UK Competition and Markets Authority (CMA) announced today that it is investigating whether Microsoft's unique partnership with OpenAI is anti-competitive.

(UPDATE: Bloomberg reports that the U.S. Federal Trade Commission is also investigating the Microsoft/OpenAI partnership to see whether it violates U.S. antitrust laws. ---Paul)

"The Competition and Markets Authority (CMA) is today providing an early opportunity for the parties and interested third parties to comment on whether the partnership between Microsoft and OpenAI, including recent developments, has resulted in a relevant merger situation and, if so, the impact that the merger could have on competition in the UK," the CMA announcement explains. "The Invitation to Comment (ITC) is the first part of the CMA’s information gathering process and comes in advance of any launch of a formal phase 1 investigation."

The CMA is right to examine this unique relationship because a formal merger between the two companies is impossible given the regulatory climate: Every major regulatory body on earth would have blocked it. But Microsoft and OpenAI have managed to find a way to avoid a formal merger while gaining all of the benefits of one. OpenAI gets the many billions of dollars it needs to advance its AI capabilities while Microsoft benefits from that work and has taken an early lead in the rush to establish this nascent market.

One might also compare this concern to the CMA's earlier issues with Microsoft acquiring Activision Blizzard. In that case, the CMA was worried about another nascent market, for cloud gaming, or game streaming from the cloud. But where cloud gaming is speculative, unpopular, and unlikely to uproot the gaming market in any way, AI is suddenly everywhere, and it has a far more obvious chance of shaping the industry going forward. There are only a handful of Big Tech firms---Amazon, Google, and Microsoft---with enough cloud infrastructure to tackle these efforts at scale and Microsoft is, in effect, buying its way into leadership in that market, thanks largely to OpenAI.

"The invitation to comment is the first part of the CMA’s information gathering process and comes in advance of launching any phase 1 investigation, which would only happen once the CMA has received the information it needs from the partnership parties," CMA senior director Sorcha O’Carroll said.

You can learn more on the CMA website.