Microsoft eludes EU antitrust merger probe over its multi-billion dollar investment in OpenAI amid claims it's turned into 'a glorified IT department for the hot startup'

 Satya Nadella with Sam Altman at a conference.
Satya Nadella with Sam Altman at a conference.

What you need to know

  • The EU antitrust watchdog is reportedly backing off Microsoft after establishing its hefty investment in OpenAI isn't an acquisition.

  • It also established that Microsoft doesn't have control over the startup's operations and direction.

  • Microsoft and OpenAI's relationship and partnership are still under scrutiny in other regions.

As it turns out, the EU antitrust watchdog won't launch a formal probe looking into Microsoft's multi-billion dollar investment in OpenAI. According to sources familiar with the matter, the European Union has established that the tech giant's investment in the AI startup isn't an acquisition.

The EU also established that Microsoft doesn't have power or control over OpenAI's operations and direction (via Bloomberg). Consequently, Microsoft's partnership doesn't warrant a formal probe by the European watchdog.

Microsoft's complicated relationship with OpenAI stirs more trouble

ChatGPT and Microsoft Logo
ChatGPT and Microsoft Logo

For context, reports about the EU watchdog potentially looking into Microsoft's investment and relationship with OpenAI in January. Perhaps this might have been prompted by OpenAI's fiasco, where the board of directors spontaneously decided to fire the startup's CEO, Sam Altman, only to rehire him back after the company's staffers raised their concerns and even threatened to quit if Altman wasn't reinstated.

RELATED: The EU forces Microsoft to unbundle Teams from its Office 365 package

Microsoft was quiet as the events unfolded, despite its heavy investment in the firm. However, reports emerged indicating Microsoft was ready to absorb the OpenAI staffers in its AI department at its LinkedIn office in San Francisco, with Sam Altman and Greg Brockman at the helm.

While things might have settled down (for now), Microsoft and OpenAI remain under scrutiny. Speaking to Reuters, an EU spokesman indicated:

"The Commission had been following very closely the situation of control over OpenAI before the recent events involving its management. We are checking whether Microsoft's investment in OpenAI might be reviewable under the EU Merger Regulation."

What would happen to Microsoft If the EU establishes a strong case prompting Microsoft and OpenAI to sever ties? The short answer is "nothing." Microsoft holds a 49% stake in the earnings of OpenAI's for-profit arm, but its CEO, Satya Nadella, believes things will be business as usual:

"We were very confident in our own ability. We have all the IP rights and all the capability. I mean, look, if tomorrow OpenAI disappeared, I don’t want any customer of ours to be worried about it, quite honestly, because we have all of the rights to continue the innovation, not just to serve the products. But we can go and just do what we were doing in partnership, ourselves, and so we have the people, we have the compute, we have the data, we have everything."

OpenAI already has enough problems on its plate

OpenAI and ChatGPT
OpenAI and ChatGPT

On top of the copyright infringement-centered lawsuits OpenAI has been slapped with over the past few months, Elon Musk filed a new case against the firm for 'stark betrayal of its founding agreement' and becoming a profit-driven company. Musk wants OpenAI to revert to its original mission and vision — ensuring everyone can access AI and its advances for free.

Elon also shared his concerns about Microsoft and OpenAI's complicated relationship:

"In reality, however, OpenAI, Inc. has been transformed into a closed-source de facto subsidiary of the largest technology company in the world: Microsoft. Under its new board, it is not just developing but is actually refining an AGI to maximize profits for Microsoft, rather than for the benefit of humanity."

Strangely enough, Elon isn't alone on this. Microsoft insiders recently shared their concerns about Microsoft and OpenAI's relationship, it has seemingly turned into an overnight "glorified IT department for the hot startup."

In the past few months, Microsoft has gotten into new partnerships with AI companies like Mistral, perhaps to diversify its portfolio, spread risk, and keep antitrust watchdogs at bay.