Microsoft ditches OpenAI board observer seat; here’s why

In a move aimed at easing growing antitrust concerns, Microsoft has given up its observer seat on OpenAI's board. The decision comes amidst scrutiny from U.S. and UK regulators over the extent of Microsoft's control over the AI startup, fueled by the meteoric rise of generative artificial intelligence and OpenAI's ChatGPT chatbot.

However, sources indicate that this concession alone is unlikely to satisfy the U.S. Federal Trade Commission (FTC). "The move shows Microsoft sees significant potential antitrust exposure and is trying to get ahead of it," revealed an FTC source to Reuters, emphasising that the agency's antitrust review of Big Tech and AI partnerships remains ongoing.

Microsoft's observer seat, obtained in November after CEO Sam Altman's return to OpenAI, granted the tech giant access to confidential information and board meetings, despite lacking voting rights. This privileged position, coupled with Microsoft's significant $10 billion investment in OpenAI, has sparked concerns among antitrust watchdogs globally.

In a letter to OpenAI dated July 9, Microsoft defended the observer role, stating it provided "insights into the board's work without compromising its independence." However, the letter ultimately cites OpenAI's recent successes and partnerships as reasons for relinquishing the seat: "Given all of this we no longer believe our limited role as an observer is necessary."

While the EU has indicated that the Microsoft-OpenAI partnership falls outside its merger regulations, British and U.S. authorities remain wary of Microsoft's influence on OpenAI's independence.

Bill Baer, a former U.S. antitrust official, commented, "That looks like the right call," acknowledging Microsoft's strategic move to address tangible evidence of control. However, he cautioned that regulators' concerns likely extend beyond the boardroom.

An anonymous antitrust lawyer echoed this sentiment, stating to Reuters that Microsoft's move might not be enough to alleviate all regulatory concerns despite making it "very difficult for antitrust regulators to prove otherwise."

In an effort to further demonstrate independence and address antitrust anxieties, both Microsoft and OpenAI are actively vying for enterprise customers in the burgeoning AI market. Microsoft is also bolstering its AI portfolio on the Azure platform and has made strategic leadership hires, signalling a potential diversification strategy beyond OpenAI.

Meanwhile, Apple, which recently announced the integration of ChatGPT into its devices, has opted against taking on a board observer role at OpenAI. Sources suggest that OpenAI has no plans to offer such roles in the future.

Instead, OpenAI will engage with key stakeholders, including Microsoft and Apple, through regular meetings, according to a company spokesperson. This new approach aims to foster collaboration while maintaining a degree of separation to address the growing antitrust scrutiny.