Microsoft and OpenAI partnership under UK CMA review for competitive implications

The UK Competition and Markets Authority (CMA) has initiated a crucial inquiry into the partnership between Microsoft Corporation and OpenAI, including recent developments, to assess its impact on competition in the UK market. This initial phase of information gathering, known as the Invitation to Comment (ITC), offers an early opportunity for both parties and interested third parties to express their views on the merger situation and its potential effects on competition.

This proactive step by the CMA comes at a time when advancements in artificial intelligence (AI) and powerful foundation models (FMs) are rapidly transforming technology. The CMA’s recent report on FMs highlights both opportunities and risks for competition and consumer protection, proposing guiding principles for the market’s development to ensure positive outcomes.

The CMA is closely monitoring the effect of strategic agreements on competition in the development and use of FMs. The partnership between Microsoft and OpenAI, encompassing a multi-year, multi-billion-dollar investment, technology development collaboration, and exclusive cloud services provision, represents a significant relationship in the FM sector.

Sorcha O’Carroll, Senior Director for Mergers at the CMA, emphasized that this inquiry is the first part of the CMA’s information gathering process, preceding any formal phase 1 investigation. The CMA’s review will determine whether the partnership has resulted in an acquisition of control or a change in the nature of control, which could impact competition.

This inquiry is part of the CMA’s broader work examining the implications of FMs for competition and consumer protection. An update on this work is expected in March 2024, focusing on how FM developers access key inputs through investments, mergers, acquisitions, and partnerships. Concurrently, the CMA is advancing its cloud infrastructure market investigation to address potential competition concerns and explore interventions for the benefit of UK customers.

The CMA’s review of the Microsoft-OpenAI partnership underscores the evolving landscape of the AI industry and the need for regulatory oversight to ensure fair competition and consumer protection in this rapidly advancing technological arena.