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UK watchdog to review Microsoft-OpenAI partnership over competition concerns

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Dec 7, 2023

The UK’s Competition and Markets Authority (CMA) has announced it will review Microsoft’s multi-billion dollar partnership with artificial intelligence (AI) lab OpenAI. The regulator will assess whether the collaborations should prompt a deeper merger probe which could potentially lead to antitrust action.

Background of the Microsoft-OpenAI partnership

OpenAI was founded in 2015 as a non-profit AI lab with backing from tech luminaries like Elon Musk, Reid Hoffman and Sam Altman. Microsoft originally invested $1 billion in OpenAI in 2019, later increasing it to over $10 billion.

As part of the deal, Microsoft gained an exclusivity agreement to license OpenAI’s AI models to be integrated into its Azure cloud platform and products like Bing search. Most notably, Microsoft has begun infusing its Bing search engine and Edge browser with capabilities powered by OpenAI’s GPT chatbot models.

Last month, Microsoft also secured a seat on OpenAI’s board – consolidating its influence over the AI lab’s strategy and decision making.

The table below summarizes key events in the partnership:

Date Milestone
July 2019 Microsoft invests $1 billion in OpenAI
November 2021 Follow-on $2 billion investment bringing total to over $10 billion
September 2022 Exclusive license for Azure and Microsoft products granted
November 2022 Microsoft gets a seat on OpenAI’s board

Why the CMA is concerned

The CMA revealed it has received several complaints raising concerns that Microsoft having both commercial relationships and a board seat allows it to exert excessive control over OpenAI’s decision making.

Critics argue OpenAI risks losing its independence and becoming an offshoot focused largely on advancing Microsoft’s interests rather than responsibly developing AI. There are worries collaboration between the two could be anti-competitive if it shuts out other cloud and tech players from accessing OpenAI’s powerful models.

Andreas Mundt, CEO of the CMA, said: “We need to ensure that this major tech tie-up does not distort competition or stifle innovation.”

What critics are saying

Sam Altman, CEO of OpenAI, has stated the deal allows them to ensure their AI systems are built safely and deployed ethically.

However, tech experts have voiced skepticism over Altman’s assurances. MIT computer scientist Daniela Rus said “past history makes me worried about big tech money influencing OpenAI’s governance”.

Meanwhile, Google-owned AI lab DeepMind’s founder Demis Hassabis tweeted that “all tech partnerships should uphold the highest standards to ensure fairness & transparency”. This hinting at concerns Microsoft is getting preferential access.

Big tech investor Roger McNamee also warned: “This has crossed the line into monopoly territory”.

Next steps in the CMA’s review

The CMA has called for feedback on the partnership over the next month before deciding whether to escalate into a formal probe. If it goes ahead as a merger inquiry, an in-depth ‘phase 2’ investigation could force Microsoft to make concessions – or even unwind the deal – to alleviate competition problems.

Analysts think the CMA is likely to escalate given the deal’s magnitude and widespread concerns. But Microsoft will fight fiercely to defend its OpenAI links as integration with its search and cloud is already underway.

In a statement, Microsoft President Brad Smith emphasized their deal “enables us to pursue our shared mission to ensure artificial general intelligence benefits all of humanity” – so will argue heightened oversight risks impeding responsible AI progress.

If forced into concessions, Microsoft may have to dilute some exclusivity arrangements – offering AI access to other big cloud players. However unwinding the board seat or ending Azure preferential rights is improbable given how strategically intertwined the tech giants now are.

What’s next for AI regulation

Beyond the CMA’s action, lawmakers globally are scrambling to strengthen oversight of AI given systems like ChatGPT demonstrate the field’s rapid acceleration.

The EU is consulting on world-first binding AI rules covering areas like transparency and risk management. While in the US, the White House has sounded the alarm over China’s AI investments – so could use OpenAI concerns as further justification to advance its own AI regulations.

Tough new constraints seem inevitable to assuage public disquiet over Big Tech’s domination of AI – an issue crystallized by unease around Microsoft steering OpenAI’s path.

So while the CMA’s review may only force limited changes, it could prove another watershed moment bringing regulatory scrutiny that transforms the AI landscape for good.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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