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Microsoft relinquishes observer seat on OpenAI board amid regulatory scrutiny.
Microsoft relinquishes observer seat on OpenAI board amid regulatory scrutiny.

Tech

Microsoft relinquishes observer seat on OpenAI board amid regulatory scrutiny.

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A startup’s new strategy means Apple will no longer be able to appoint an executive to a similar role. Amid regulatory scrutiny over big tech’s relationships with AI startups, Microsoft has given up its observer seat on the OpenAI board. As reported by the Financial Times, Microsoft, OpenAI’s biggest financial backer, announced this change in a letter, stating the resignation from the non-voting observer role was “effective immediately.”

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Microsoft cited significant progress by OpenAI’s new board, formed after the dramatic firing and reinstatement of CEO Sam Altman last year, as a reason for stepping back. Microsoft, which has invested $13 billion in OpenAI, stated that the startup was heading in the right direction, emphasizing safety and a positive culture. Therefore, they no longer saw the need for their limited observer role.

However, it’s believed that concerns from competition regulators influenced Microsoft’s decision. The UK’s Competition and Markets Authority is investigating whether the partnership constitutes “an acquisition of control,” and the US Federal Trade Commission is also examining the partnership. While the European Commission is not conducting a formal merger review, it is scrutinizing exclusivity clauses in the companies’ agreement.

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An OpenAI spokesperson said the startup is developing a new method to engage key strategic partners like Microsoft and Apple, along with other financial investors. OpenAI will host regular stakeholder meetings to discuss progress and enhance collaboration on safety and security.

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They will no longer have board observers, thus ruling out Apple appointing someone to this role.

It was reported that Apple planned to place Phil Schiller, head of its app store, on the board as part of a June agreement. Apple has been approached for comment.

Investments in AI startups are under regulatory scrutiny. Besides OpenAI and Microsoft, the FTC is investigating partnerships between Anthropic and tech giants Google and Amazon. The UK’s CMA is also examining Amazon and Anthropic, as well as Microsoft’s partnerships with Mistral and Inflection AI.

Alex Haffner, a partner at UK law firm Fladgate, said Microsoft’s decision was likely influenced by the regulatory environment, noting that regulators are focused on the complex relationships between big tech and AI providers.

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This scrutiny requires companies like Microsoft to carefully consider how they structure their partnerships going forward.

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