Microsoft exits OpenAI's boardroom to sidestep regulatory scrutiny

Microsoft is giving up its non-voting observer seat on OpenAI's board, citing progress in the company's direction - yet fear of regulatory scrutiny no doubt also played some part in the decision-making process.

The non-voting observer at Microsoft was parachuted onto OpenAI's board following the chaos of last year in which OpenAI CEO Sam Altman was unceremoniously ejected then swiftly welcomed back. Rattled by the antics at OpenAI and the impact on its multibillion-dollar investment in the company, Microsoft took the seat to keep tabs on things.

A European Commission review has since cleared Microsoft of trying to exert control over OpenAI. However, regulators are continuing to examine the company's behavior amid worries over the impact on competition of OpenAI and Microsoft's partnership.

Microsoft's relationship with OpenAI and the billions it has invested into the company has also come under scrutiny by the US Federal Trade Commission (FTC) as well as the UK's Competition and Markets Authority (CMA).

While the European Commission opted not to pursue a review of the partnership under EU merger rules, the CMA's review is ongoing. Microsoft's decision to drop its non-voting observer seat means it has one less thing to defend regarding its relationship with OpenAI.

In the withdrawal letter seen by The Register, Keith Dolliver, Deputy General Counsel at Microsoft, wrote: "Over the past eight months we have witnessed significant progress by the newly formed board and are confident in the company's direction."

"This position provided insights into the board's transitional work without compromising its independence," he added.

Following Microsoft's investment in OpenAI, the tech giant has gained an apparent early lead in the generative AI race and enjoyed increased earnings.

After Apple's announcement that it would support OpenAI's ChatGPT in its products, the company was expected to take an observer seat on the board. However, according to reports, it has since elected not to.

Alex Haffner, a competition partner at law firm Fladgate, told The Reg: "It is hard not to conclude that Microsoft's decision has been heavily influenced by the ongoing competition/antitrust scrutiny of its (and other major tech players) influence over emerging AI players such as Open AI."

Haffner observed that Microsoft had scored a "win" at the end of June with the European Commission dropping the merger control probe of Microsoft and OpenAI. However, he pointed out that regulators were still looking at the impact on AI competition of arrangements made by big tech.

"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 going forward," said Haffner. ®

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