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Microsoft has announced it will relinquish its observer seat on OpenAI’s board, a move influenced by increasing regulatory scrutiny over generative artificial intelligence in both Europe and the U.S.
Keith Dolliver, Microsoft’s deputy general counsel, communicated this decision in a letter to OpenAI on Tuesday. The letter, seen by CNBC, stated that the observer position had provided valuable insights into OpenAI’s board activities without compromising its independence. However, Dolliver noted that the seat was no longer necessary as the new board had made significant progress. Both Microsoft and OpenAI were contacted for comment.
The European Commission had previously indicated that Microsoft might face an antitrust investigation, focusing on the markets for virtual worlds and generative AI. In January, the commission announced it was examining agreements between large digital market players and generative AI developers, specifically highlighting the Microsoft-OpenAI partnership.
Although the EU concluded that Microsoft’s observer seat did not compromise OpenAI’s independence, regulators are seeking additional third-party perspectives on the arrangement. The UK’s Competition and Markets Authority continues to express concerns.
Microsoft took the nonvoting board seat at OpenAI in November to address questions about its interest in the startup following a tumultuous period during which OpenAI CEO Sam Altman was briefly fired and then rehired. At that time, Altman noted that partnering with Microsoft was the right decision and welcomed the inclusion of Microsoft as a non-voting observer on the new board.
OpenAI gained global prominence after launching its ChatGPT chatbot in late 2022, offering users smart and creative responses to text queries that can lead to in-depth conversations. Microsoft has invested billions into the startup, with total investments reportedly reaching $13 billion, positioning itself as a leader in the AI space.
“It is hard not to conclude that Microsoft’s decision has been heavily influenced by the ongoing competition/antitrust scrutiny of its (and other major tech players) influence over emerging AI players such as OpenAI,” Alex Haffner, a competition partner at law firm Fladgate, told CNBC via email. “It is clear that regulators are very much focused on the complex web of inter-relationships that big tech has created with AI providers, hence the need for Microsoft and others to carefully consider how they structure these arrangements going forward.”