Microsoft's OpenAI Partnership: A Close Call with UK Competition Watchdog

Microsoft Corp. (MSFT) has dodged a potential antitrust investigation by the UK's Competition and Markets Authority (CMA) over its partnership with OpenAI, the company behind the popular AI chatbot ChatGPT. The CMA announced on Wednesday that it would not be launching a formal investigation into the deal, citing a lack of evidence that microsoft had gained de facto control over OpenAI. However, the watchdog did acknowledge that Microsoft exerts a high level of material influence over OpenAI's commercial policy.

The CMA's decision comes after a 14-month review of the partnership, which began in December 2023. Microsoft has invested nearly $14 billion in OpenAI since 2019, making it one of the AI company's top investors. The tech giant also packages many of OpenAI's technologies in a managed offering called the Azure OpenAI Service and works closely with the startup to develop products like the Copilot chatbot and GitHub Copilot AI coding assistant.

The CMA initially expressed concerns that Microsoft's investment and involvement in OpenAI could lead to a substantial lessening of competition in the UK AI market. However, recent developments, such as Microsoft renegotiating its cloud computing agreement with OpenAI and granting waivers for additional computing capacity, have potentially weakened Microsoft's influence over the AI startup.

Microsoft and OpenAI celebrated the CMA's decision to close its investigation, with a spokesperson for Microsoft stating that the partnership "promotes competition, innovation, and responsible AI development." OpenAI also welcomed the decision, emphasizing that it operates in a highly competitive and rapidly evolving industry.

The CMA's decision highlights the importance of transparency and disclosure in such partnerships, as well as the need for regulators to monitor the evolving dynamics of these relationships. As the AI industry continues to grow and attract significant investment from tech giants, regulators will need to remain vigilant to ensure that these partnerships do not lead to a substantial lessening of competition or stifle innovation.



In conclusion, Microsoft's partnership with OpenAI has raised concerns about the tech giant's market power and the potential impact on competition in the AI industry. While the CMA has decided not to investigate the deal under merger rules, the watchdog has acknowledged that Microsoft exerts a high level of material influence over OpenAI's commercial policy. As the AI industry continues to evolve, regulators will need to remain vigilant to ensure that these partnerships do not hinder competition or stifle innovation.