Microsoft Gives Up Observer Seat on OpenAI Board Amid Regulatory Scrutiny | OpenAI

Microsoft has withdrawn from its observer seat on OpenAI’s board and Apple will no longer be able to appoint an executive to a similar role, amid regulatory scrutiny of the relationship between big tech companies and AI startups.

Microsoft, the ChatGPT developer’s biggest financial backer, announced the move in a letter to the startup, as first reported by the Financial Times. It said the resignation of the observer role, which does not have voting rights on board decisions, was “effective immediately.”

Microsoft said it has seen significant progress from OpenAI’s new board, which was formed after the ouster and reappointment of CEO Sam Altman last year, and said OpenAI is moving in the right direction, including a commitment to safety and building a “great culture.”

“Given all of this, we no longer believe our limited role as a watchdog is necessary,” said Microsoft, which has invested $13bn (£10.2bn) in OpenAI.

However, Microsoft is understood to believe that the role of the controller has raised concerns among competition regulators. In the UK, the Competition and Markets Authority is reviewing whether the partnership has resulted in an “acquisition of control,” while in the US, the Federal Trade Commission is also reviewing whether the partnership has resulted in an “acquisition of control.” Looking at partnership.

The European Commission has decided not to conduct a formal merger review into Microsoft’s investment in OpenAI but is examining exclusivity clauses in the agreement between the companies.

An OpenAI spokesperson said the San Francisco-based startup is working on a new approach to “inform and engage key strategic partners” such as Microsoft and Apple as well as other financial investors.

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“In the future, we will host regular meetings with stakeholders to share progress on our mission and ensure stronger collaboration on safety and security,” the company spokesperson added. “We look forward to continuing to receive feedback and advice from these key stakeholders.”

OpenAI will not have observers on the board under the new approach, which would rule out Apple taking on such a role. Reports emerged this month that Apple was close to appointing its App Store chief, Phil Schiller, to the board as part of a deal announced in June. Apple has been contacted for comment.

Investments in AI startups are under scrutiny from regulators. In addition to looking into Open AI and Microsoft, the Federal Trade Commission said it is examining partnerships between Anthropic, the company behind the Claude chatbot, and two tech giants: Google and Amazon. In the U.K., the CMA is also looking into Amazon and Anthropic’s partnerships, as well as Microsoft’s partnerships with Mistral and Inflection AI.

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Alex Hafner, a partner at UK law firm Fladgate, said it was “hard not to conclude” that Microsoft’s decision was influenced by the regulatory environment.

“It is clear that regulators are very focused on the complex web of interconnected relationships that big tech companies have created with AI service providers, and hence the need for Microsoft and others to carefully consider how these arrangements will be structured in the future,” he said.

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