Microsoft drops board observer seat at OpenAI amid regulatory scrutiny

Microsoft has given up its board observer seat at OpenAI, citing significant improvements in the AI start-up’s governance over the past eight months. This decision comes as the observer role faced regulatory scrutiny on both sides of the Atlantic.

Microsoft took the non-voting observer position in November last year after OpenAI CEO Sam Altman returned to lead the company, which operates the ChatGPT AI chatbot. The role allowed Microsoft to attend board meetings and access confidential information but did not grant voting rights.

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The observer seat, along with Microsoft’s over $10 billion investment in OpenAI, raised concerns among antitrust watchdogs in Europe, Britain, and the U.S. about the extent of Microsoft’s control over OpenAI.

In a letter to OpenAI dated July 9, Microsoft cited the start-up’s new partnerships, innovation, and growing customer base as reasons for stepping back. “Over the past eight months we have witnessed significant progress by the newly formed board and are confident in the company’s direction. Given all of this we no longer believe our limited role as an observer is necessary,” the letter stated.

Meanwhile, Apple, which had been expected to take an observer role on OpenAI’s board, will not do so. The Financial Times reported this decision, citing a person with direct knowledge of the matter. Apple did not respond to a request for comment.

Despite Microsoft’s decision, EU antitrust regulators last month said the partnership would not be subject to the bloc’s merger rules because Microsoft does not control OpenAI. However, they will seek third-party views on the exclusivity clauses in the agreement. British and U.S. antitrust watchdogs continue to have concerns and questions about Microsoft’s influence over OpenAI and its independence.

Microsoft and OpenAI are increasingly competing to sell AI technology to enterprise customers. Microsoft is also expanding its AI offerings on the Azure platform and has hired Inflection’s CEO to head its consumer AI division, a move seen as an effort to diversify beyond OpenAI.