Dive Brief:
- The U.K. Competition and Markets Authority concluded its inquiry into Microsoft and OpenAI’s partnership, which it says did not meet the criteria of a merger under the 2002 Enterprise Act.
- “Taking into account all of the available evidence, particularly in light of recent developments in the partnership which reduce OpenAI’s reliance on Microsoft for compute, the CMA does not believe that Microsoft currently controls OpenAI’s commercial policy,” the agency said Wednesday.
- The U.K. agency first launched its inquiry in December 2023, when it sought to gather information on Microsoft’s multibillion-dollar investment to determine whether it constituted a relevant merger event under U.K. laws.
Dive Insight:
Governments are grappling with how to regulate AI amid fast-moving enterprise adoption of the technology. In its Wednesday decision, the U.K. agency acknowledged the complexity of the undertaking.
“The AI sector is still rapidly evolving,” the agency said before focusing on Microsoft and OpenAI. “Material aspects of the Partnership have been changing over the course of the investigation. Furthermore, there is no ‘bright line’ between factors which might give rise to material influence and those giving rise to de facto control.”
In its review, the CMA weighed the “commercial realities of the relationship” between Microsoft and OpenAI as well as the formal terms of the arrangement. In January, Microsoft freed OpenAI from some exclusivity obligations, including waivers to build additional compute capacity so that the AI startup can pursue projects such as the $500 billion Stargate infrastructure initiative.
“This new agreement also includes changes to the exclusivity on new capacity, moving to a model where Microsoft has a right of first refusal,” Microsoft said in the announcement. In a Wednesday statement to CIO Dive, Microsoft said it “welcomed the CMA’s conclusion, after careful and prudent consideration of the commercial realities, to close its investigation.”
The U.K. regulator has also looked into other partnerships between big tech and AI companies, such as Microsoft’s licensing deal with France-based AI startup Inflection. Microsoft hired top talent from the company — including CEO Mustafa Suleyman — to establish a new division called Microsoft AI, a move the CMA approved last September.
Later that month, the CMA cleared Amazon’s partnership with Anthropic. A month after the announcement, Amazon fueled the startup with an additional $4 billion in funding.
In addition to AI, U.K. regulators have closely watched developments in the cloud market, flagging Microsoft’s licensing practices as anti-competitive. Microsoft rebuked the claims in a 101-page rebuttal this week, pointing to Google’s rising cloud market share and AWS’ dominance over the sector.
