Competition and Markets Authority Seeks Public Input on Microsoft's Collaboration with OpenAI

Dear Lion Herald Reader

The Competition and Markets Authority (CMA) is taking proactive steps to assess the potential impact of Microsoft's partnership with OpenAI. The CMA has launched an Invitation to Comment (ITC) to gather perspectives from stakeholders on whether this collaboration has resulted in a relevant merger situation and the potential consequences it might have on competition in the UK.

The partnership between Microsoft and OpenAI, characterized by a multi-year, multi-billion dollar investment, collaboration in technology development, and exclusive provision of cloud services by Microsoft to OpenAI, has drawn the attention of regulatory authorities. The CMA's recent report on the market for powerful foundation models (FMs) highlighted both the opportunities and risks associated with the proliferation of AI technologies. The report proposed principles to guide the development of the market, emphasizing the importance of sustained competition among AI developers for fostering innovation, growth, and responsible practices.

As part of its ongoing efforts to monitor the impact of strategic agreements on competition in the development and use of FMs, the CMA is now seeking public input to determine whether the Microsoft/OpenAI partnership has resulted in a relevant merger situation. This includes examining recent developments in the governance of OpenAI, some of which involved Microsoft. The CMA will specifically evaluate whether the partnership has led to an acquisition of control, such as material influence or de facto control, and whether there has been a change in the nature of control by one entity over another.

Sorcha O’Carroll, Senior Director for Mergers at the CMA, stated, "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."

The CMA is inviting views on the creation of a relevant merger situation and, if so, the impact on competition in the UK. The regulator will assess whether there has been an acquisition of control or a change in the nature of control, with implications for voting rights and influence over entities.

In addition to this specific inquiry, the CMA continues its broader examination of the implications of FMs for competition and consumer protection. An update on this work is expected in March 2024, shedding light on how FM developers access key inputs, such as expertise, data, and computing power, through various means, including investments, mergers, acquisitions, and partnerships. Concurrently, the CMA is progressing its cloud infrastructure market investigation, exploring potential competition concerns and interventions to enhance the supply of these critical services for UK customers.

Fabrice Iranzi, Editor in Chief / Lion Herald

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