Microsoft Steps Back from OpenAI Board Amidst Regulatory Scrutiny

Microsoft will not have an observer seat on the board of OpenAI. Apple’s possible similar role is also affecting the decision. In general, regulators are looking at how big tech firms are cooperating with AI startups to ensure competition stays fair and development is safe.


Microsoft has announced it will step down from its observer seat on the OpenAI board, meaning it will no longer have any kind of non-voting presence in board meetings. The decision comes at a time when big technology companies’ relationships with AI startups are under increasing investigation by regulatory agencies.

Microsoft is the biggest financial backer of OpenAI, maker of ChatGPT, and has invested $13 billion within it. They announced this in a letter sent to OpenAI that the Financial Times first reported. The observer role, which let Microsoft observe but not vote on board decisions, is now ended “effective immediately.”

It’s partly because OpenAI has come really far with its new board. The new board was set up after a dramatic episode last year when the CEO, Sam Altman, got initially fired and then reinstated. Microsoft believes that OpenAI is now on the right path, focusing on safety and a positive culture.

Microsoft explained, “Given all of this, we no longer believe our limited role as an observer is necessary.” The company also spoke of some concerns their observer role has been likely to raise among competition regulators. For example, in the UK, the CMA is presently investigating whether Microsoft’s partnership with OpenAI has resulted in “an acquisition of control.” Similarly, in the US, the FTC is currently probing into this partnership.

The European Commission will not pursue a formal merger review in relation to Microsoft’s investment in OpenAI, although concerns over the exclusivity clauses in their agreement remain.


An OpenAI spokesperson said the startup is now in the process of adopting a different approach toward keeping key partners like Microsoft and Apple informed. “We will engage in regular meetings with these partners to provide progress updates and better align collaboration around safety and security,” the representative told us.

Under the new structure, OpenAI won’t have board observers anymore. And that also means Apple won’t be able to appoint an executive to a similar role. According to another report last week, Apple was planning to put Phil Schiller, the head of its app store business, on OpenAI’s board. With new rules in place, that won’t happen. Apple has stayed mum over the development.

Regulators worldwide have taken a close interest in investments happening in AI startups. Other than the case of Microsoft and OpenAI, the FTC is also investigating partnerships between AI companies and big tech companies. For example, the FTC has been investigating Anthropic, maker of a chatbot called Claude, and its ties with Google and Amazon. The CMA is investigating allegations about Amazon and Anthropic, while Microsoft deals with other AI companies, including Mistral and Inflection AI.


This enhanced scrutiny makes very clear that the regulators would not want the big tech companies Eidetically getting control over AI startups, ./ thus killing competition and innovation. Microsoft stepping back from its observer role on OpenAI’s board shows the company is sensitive to these regulatory concerns, though at the same time, it demonstrates its commitment to supporting OpenAI’s mission in a manner that743: ensures safety and fairness in the AI industry.


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