The UK’s Competition and Markets Authority (CMA) and the US Federal Trade Commission (FTC) are scrutinizing Microsoft’s (NASDAQ:MSFT) multibillion-dollar partnership with OpenAI, the creator of ChatGPT.

The CMA has initiated an information-gathering process, a prelude to a formal investigation expected to commence next year. Although the FTC is reportedly examining Microsoft’s investment in OpenAI, no formal investigation has been launched as of now.

The investigation centers around whether the collaboration between Microsoft and OpenAI, along with recent developments, has led to a relevant merger situation. The CMA’s involvement has become a significant hurdle for major tech deals, and antitrust enforcers in Brussels and Washington are closely monitoring developments in the artificial intelligence (AI) market.

Comments have been sought from involved parties, including Microsoft and OpenAI, as well as any interested parties such as competitors and customers, with a deadline of January 3, 2024.

Both MSFT and OpenAI assert that their partnership allows the latter to independently research and develop safe AI tools. Microsoft emphasizes that the collaboration maintains the independence of both entities, fostering innovation and competition in the AI space. The only change highlighted is the addition of a non-voting observer position on OpenAI’s board.

The CMA will conduct an information-gathering process to determine its jurisdiction to review the deal, considering factors like the investment size, influence on decision-making, and a change in control. Microsoft’s recent involvement in OpenAI’s board changes has attracted regulatory attention, and the investigation will unfold in the coming months.

Microsoft has previously dealt with the FTC and CMA regarding its $69 billion acquisition of Activision Blizzard, addressing antitrust concerns. The CMA initially blocked the Activision deal but later approved it after MSFT modified its acquisition plan.

Microsoft’s Dominance in AI Revenue through OpenAI

Microsoft’s investment of up to $13 billion for a 49% stake in OpenAI’s for-profit arm has positioned it as the largest supporter of the AI company. The deal initially granted exclusive rights to commercialize OpenAI’s technology for corporate clients. In return, OpenAI gained access to MSFT’s extensive cloud computing resources, crucial for developing advanced generative AI systems.

While specific details of their alliance remain undisclosed, OpenAI’s AI technology has been integrated into various Microsoft products throughout the year. This investment has empowered OpenAI to compete in the AI market by providing access to large-scale computing power.

Microsoft continues to enhance its generative AI capabilities. Integrating GPT-4 into Bing and Edge for a ChatGPT-like experience, and offering the Azure OpenAI Service on Microsoft Azure, highlight the company’s commitment to AI advancements.

Microsoft’s robust generative AI initiatives pose a competitive challenge to companies like Alphabet (NASDAQ:GOOGL), Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN). Microsoft’s recent introduction of OpenAI’s DALL-E 3 AI image-synthesis model, integrated with ChatGPT, showcases its ongoing commitment to AI innovation.

Featured Image: Pexels @ Salvatore De Lellis

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