Microsoft ditches OpenAI board observer seat amid regulatory scrutiny

Microsoft has relinquished its board observer seat at OpenAI, which had drawn regulatory scrutiny on both sides of the Atlantic, citing significant improvements in the AI startup’s governance over the past eight months.

Apple, initially expected to take an observer role on OpenAI’s board, will not do so, according to the Financial Times, which cited a person with direct knowledge of the matter. Apple did not respond to a request for comment.

Last November, Microsoft assumed a non-voting observer position on OpenAI’s board after OpenAI CEO Sam Altman resumed leadership of the company, known for operating the generative AI chatbot ChatGPT. This role allowed Microsoft to attend board meetings and access confidential information without voting rights on key decisions, including director elections.

The observer seat, along with Microsoft’s more than $10 billion investment in OpenAI, raised concerns among antitrust regulators in Europe, Britain, and the U.S. regarding the extent of Microsoft’s control over OpenAI.

Microsoft pointed to OpenAI’s new partnerships, innovation, and growing customer base since Altman’s return as reasons for giving up its observer seat. “Over the past eight months, we have witnessed significant progress by the newly formed board and are confident in the company’s direction. Given all of this, we no longer believe our limited role as an observer is necessary,” Microsoft said in a letter to OpenAI dated July 9.

Last month, EU antitrust regulators stated the partnership would not be subjected to the bloc’s merger rules since Microsoft does not control OpenAI, but they would seek third-party views on the exclusivity clauses in the agreement. In contrast, British and U.S. antitrust watchdogs continue to express concerns and have questions about Microsoft’s influence over OpenAI and the latter’s independence.

Microsoft and OpenAI are increasingly competing to sell AI technology to enterprise customers, aiming to generate revenue and demonstrate their independence to regulators to address antitrust concerns. Additionally, Microsoft is expanding its AI offerings on the Azure platform and has hired Inflection’s CEO to lead its consumer AI division, a move seen as an effort to diversify beyond OpenAI.

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