The CMA just dropped its probe into the Microsoft–OpenAI deal

The UK's Competition and Markets Authority (CMA) has dropped its probe into the partnership between Microsoft and OpenAI, saying the deal doesn't give Microsoft a controlling interest over the AI firm.

The competition regulator said that despite Microsoft's heavy investment in OpenAI and its exclusive deals for some products, the tech giant has only a 'material influence' over OpenAI, meaning that the tie-up doesn't meet the threshold for a full enquiry.

"Looking at the evidence in the round (including the recent changes), we have found that there has not been a change of control by Microsoft from material influence to de facto control over OpenAI," said Joel Bamford, executive director of the CMA, in a LinkedIn post.

"Because this change of control has not happened, the partnership in its current form does not qualify for review under the UK’s merger control regime."

However, he warned the decision is just a question of jurisdiction, and should not be read as the partnership being given a clean bill of health on potential competition concerns.

What concerned regulators?

The investigation examined a deal signed between the two companies in 2019, which saw Microsoft invest an initial $10 billion in OpenAI, with another $3 billion following.

But it was four years later that the CMA opened its investigation after Sam Altman was first sacked and then reinstated as OpenAI’s chief executive.

"In view of Microsoft's potentially important role in securing Sam Altman's re-appointment, the CMA believed there was a reasonable chance that an investigation would reveal that Microsoft had increased its control over OpenAI's commercial policy," the CMA said at the time.

This new decision is based partly on the shifts in the relationship between the two firms that have taken place over the last few years. In January, for example, Microsoft announced a change to its contractual rights in relation to supply of compute capacity, which reduced OpenAI’s reliance on Microsoft.

The CMA has faced criticism for the time it's taken to reach its conclusions - probes into other partnerships in the AI sector have taken just a matter of months.

"We are not blind to the length of time that this investigation has taken – particularly given the reforms we have launched recently which will considerably speed up and streamline the UK mergers process. We know pace matters to business confidence and investment," said Bamford.

However, Bamford added that simply hasn't been possible in this case.

"A combination of the degree of complexity, the changing nature of the arrangements and how they operate in practice, and the mutual desire for open dialogue between the CMA and the companies to ensure we understood these developments over time, has led to an exceptionally extended period of review," he said.

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