Microsoft seeks to portray its relationship with OpenAI to federal authorities as more akin to a ‘frenemies’ dynamic than a genuine alliance, according to a report submitted to the SEC in July.
In the 10-K periodic financial performance and conditions report, Microsoft identified OpenAI as a competitor in several sections, while also frequently referring to OpenAI as its ‘strategic partner’ throughout the document.
Competitive Counterparts
Notably, Microsoft mentions numerous competitors and highlights ‘intense competition across all markets’ in its competition statements.
These competitors span from Apple to Nintendo, along with various software and coding companies.
However, the company based in Redmond, Washington, identifies only one strategic collaborator in the entire document: OpenAI.
A brief review found 72 occurrences of the term ‘partner,’ including ‘partnership’ and their plural forms. Among these mentions, it seems Microsoft does not specify any partners besides OpenAI. Most references were generic, such as ‘Microsoft partners’ and ‘our partnerships.’
Although this likely lacks legal implications, it is significant given that both OpenAI and Microsoft are under antitrust investigations in the UK, US, and EU due to their strategic partnership.
Challenging Ally
The dynamic between Microsoft and OpenAI has displayed many features typical of a major tech acquisition, minus the actual purchase.
In July 2019, Microsoft injected $1 billion into OpenAI and secured the exclusive rights as its cloud service provider, effectively acquiring the hosting rights for ChatGPT well before its debut.
Following ChatGPT’s release, Microsoft invested an additional $10 billion. As a result, Microsoft gained early and somewhat exclusive privileges to integrate GPT-4 into its “Copilot” and “Bing” services, along with enhancements to OpenAI’s offerings.
In 2023, OpenAI went through a dramatic leadership upheaval, during which CEO and cofounder Sam Altman was temporarily removed, and the company’s board of directors underwent significant changes.
During Altman’s brief absence, Microsoft vowed to hire him and any other OpenAI staff who were dismissed or willing to leave, promising them a dedicated division within Microsoft.
Eventually, Altman was reinstated as CEO, and the board was restructured to include an observer seat specifically for Microsoft. Eight months later, in July 2024, Microsoft relinquished that board seat, stating that it no longer deemed the observer position necessary.
Regulatory Monitoring
Simultaneously, the highlighted antitrust investigations began gaining momentum, with the UK and EU initiating probes in late 2023 and early 2024. As recently as June 2024, the US Justice Department and the Federal Trade Commission commenced formal investigations into Microsoft, Nvidia, and OpenAI, addressing concerns about their potential dominance in the AI sector.
Although this doesn’t necessarily signal immediate trouble—antitrust investigations are fairly routine for major tech firms—it is noteworthy that Microsoft seems to be portraying its distinct relationship with OpenAI as typical competitive collaboration.
Author : Mr. oxBull
Article Published : August 05, 2024.
