Microsoft’s recent recruitment of top executives and AI engineering talent from OpenAI has raised questions about the role competition regulators can play in addressing the movement of AI expertise and value into Microsoft’s commercial empire.
Key Takeaway
The ongoing power struggle between Microsoft and OpenAI has not yet caught the attention of competition authorities. With Microsoft stressing its commitment to the partnership with OpenAI and maintaining a minority stake in the company, regulators may have limited grounds to intervene.
Flight of Talent
The OpenAI board’s failed attempt to reinstate its CEO Sam Altman has resulted in him, the president Greg Brockman, and several leading AI engineers joining Microsoft to establish a new AI research division. It appears that Microsoft’s backup plan is to recreate OpenAI within its own organization.
A mass exodus of OpenAI staff to Microsoft is also a possibility, with hundreds of employees threatening to quit unless the board reinstates Altman and Brockman. Microsoft has assured OpenAI employees of positions at the new subsidiary if they choose to join.
Microsoft’s Public Image
Microsoft’s leadership, including CEO Satya Nadella, has sought to maintain a reassuring public image despite the turmoil. Nadella has emphasized the continuation of the partnership with OpenAI and expressed confidence in the product roadmap. However, his statements can be seen as an attempt to appease both investors and competition regulators.
Regulatory Challenges
Regulating the situation between Microsoft and OpenAI proves challenging for competition authorities. Cristina Caffarra, a leading competition economist, suggests that regulators have limited grounds for formal intervention as the situation primarily involves the retention of senior executives rather than an acquisition. However, if Microsoft were to gain a seat on OpenAI’s board, it could trigger fresh scrutiny.
Microsoft’s market power in cloud computing and its strategic investments in OpenAI raise concerns about potential AI monopolies. However, competition authorities are limited by existing tools and rules and can only intervene if specific triggers are met.
European and German Perspectives
Germany’s Federal Cartel Office (FCO) has not yet found Microsoft’s cooperation with OpenAI to be subject to merger control. However, the FCO warns that any increase in Microsoft’s influence on OpenAI could trigger a review under merger control.
Concerning the European Union, Microsoft has been designated as a “gatekeeper” under the Digital Markets Act (DMA) with its Windows OS classified as a “core platform service.” However, the DMA focuses on past competition concerns, and experts doubt its ability to keep up with rapidly evolving technologies.
Despite these developments, competition authorities are cautiously observing the situation and may not be ready to intervene yet. Critics argue that regulators should take a more proactive approach and investigate deals between tech giants, even if they fly under the radar.
