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US regulators investigate who should investigate Microsoft/OpenAI

If only there was a chatbot they could ask...

The two US agencies which investigate competition issues are butting heads over who should take the lead on investigating OpenAI and its curious relationship with Microsoft.

The Federal Trade Commission and the US Department of Justice have been talking for months about the issue, Politico reported last week, holding up any official examination of OpenAI’s – and by proxy, Microsoft’s – dominant position in generative AI.

EU and UK competition authorities have already begun sniffing around the relationship between the two firms.

Competition investigations don’t always lead to action. However, they can be a distraction for management at the companies concerned and might give some tech leaders pause for thought before investing in specific technology.

OpenAI’s structure is openly Byzantine. It consists of the OpenAI Nonprofit, founded in 2015, and a commercial subsidiary with “capped profits”. Microsoft has been one of the biggest backers of OpenAI and its cloud provider.

This all came under the microscope with the boardroom ructions at OpenAI last year, which saw Sam Altman resign as CEO, only to be offered a berth by Microsoft, and then return to OpenAI with a new board and Microsoft’s support.

This blending of profit and non-profit elements is part of the problem between the FTC and DoJ, as they prepare to decide whether the partnership gives OpenAI an unfairly dominant position.

The FTC does not have jurisdiction over non-profits, Politico reports, but does have a wider remit to investigate anticompetitive behaviour beyond Federal antitrust laws.

For its part, the DoJ has investigated internet search in the past, something that is central to the OpenAI-Microsoft tie-up, given Redmond’s use of OpenAI technology in Bing.

Moreover, the DoJ spent much of the 1990s investigating the Microsoft. Amongst other issues, Microsoft’s integration of its browser and operating system was seen as strangling competition in the nascent web browser market. A breakup of the company was a possibility at one point. The case ended with a 2001 consent decree under which Microsoft, amongst other things, opened up its APIs.

Arguably the most important effect of the DoJ’s actions was to make Microsoft a much duller place to work – and write about - for most of the noughties. Insiders said that the consent decree crimped engineers’ ability to push the envelope and innovate. This, together with more tempting deals at Google and other upstarts, meant Microsoft found it harder to attract the brightest engineers, apparently.

All of which could provide a useful history lesson for AI's new gods.

The European Commission announced earlier this month that it was investigating whether Microsoft’s investment in OpenAI “might be reviewable under the EU Merger Regulation” as part of a broader investigation into virtual worlds and AI.

A request for comment by the UK’s Competition and Markets Authority was due to close on January 3, though so far the agency has not revealed any further steps. The agency is also investigating foundation models, and has an ongoing investigation into cloud services.

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