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FTC Probes Microsoft's OpenAI Investments, Says Board Seat Termination Won't Resolve Concerns

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by Tyler Durden
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Update (1111ET):

The mystery behind Microsoft's abrupt resignation from its OpenAI observer board seat has been revealed: It appears there was an investigation by the Federal Trade Commission underway. 

Earlier. 

Elon Musk chimed in. 

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There's definitely more to this story than meets the eye.

Let's begin with new details from the Financial Times, which reveal that Microsoft has relinquished its board observer seat at OpenAI, while Apple is not expected to take an observer role on the board.

The big mystery is why Microsoft and Apple are suddenly trying to distance themselves from OpenAI. Could it be due to mounting antitrust investigations from Europe to the US? 

Here's more from FT: 

Microsoft, which has invested $13bn in the maker of the generative AI chatbot ChatGPT, said in a letter to OpenAI that its withdrawal from its board role would be "effective immediately".

Apple had also been expected to take an observer role on OpenAI's board as part of a deal to integrate ChatGPT into the iPhone maker's devices, but would not do so, according to a person with direct knowledge of the matter.

Instead of the board observer seats, an OpenAI spokesperson said the startup plans to host regular meetings with partners, including Microsoft and Apple, and investors Thrive Capital and Khosla Ventures.

The spokesperson said this is "a new approach to informing and engaging key strategic partners" under Sarah Friar, the former Nextdoor boss who was recently hired as its first CFO. 

The move comes as antitrust officials across the West, primarily in Europe and the US, scrutinize Microsoft and OpenAI's partnership amid major concerns about competition in the AI space. 

Last year, Microsoft accepted the observer board seat following the chaotic mess after chief executive Sam Altman was fired and then re-hired days later. 

"This position provided insights into the board's activities without compromising its independence," Microsoft's deputy general counsel Keith Dolliver wrote in a letter to OpenAI late on Tuesday.

Dolliver continued by saying since then, "We have witnessed significant progress from the newly formed board and are confident in the company's direction," and therefore, Microsoft's role on the board was no longer "necessary." 

An OpenAI spokesperson said: "We're grateful to Microsoft for voicing confidence in the board and the direction of the company, and we look forward to continuing our successful partnership."

In June, the European Commission said it was exploring the possibility of an antitrust investigation between Microsoft and OpenAI. The US Federal Trade Commission has also been examining investments made by mega tech companies in generative AI startups.

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