Microsoft gives up its observer seat on the OpenAI board

Microsoft announced that the corporate would hand over its observer seat on OpenAI's board as generative artificial intelligence faces regulatory scrutiny in Europe and the US.

Keith Dolliver, Microsoft's deputy general counsel, wrote a letter to OpenAI late Tuesday saying his position gave him insight into the board's activities without compromising its independence.

But the letter, seen by CNBC, said the seat was not needed. because Microsoft has “seen significant progress through the newly formed board.” CNBC has asked Microsoft and OpenAI for comment.

The European Commission had previously announced that Microsoft would face an antitrust investigation as a part of its investigation into the markets for virtual worlds and generative artificial intelligence.

The Commission, the EU's executive body, said in January that it was examining “some of the agreements concluded between major players in the digital market and developers and providers of generative AI”, highlighting particularly the merger between Microsoft and OpenAI, which it could closely examine.

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The EU has It has since been determined that the observer seat didn’t alter OpenAI’s independence, however the bloc’s regulators are looking for additional third-party views on the deal. Britain’s The Competition and Markets Authority stays concerned.

Microsoft took a non-voting seat on OpenAI's board in November to allay some questions on Microsoft's interest within the startup, following a turbulent period by which OpenAI CEO Sam Altman was fired after which promptly rehired.

Altman said in a note to employees on the time that OpenAI “clearly made the right decision in partnering with Microsoft and I am pleased that they will serve on our new board as non-voting observers.”

OpenAI became considered one of the most popular startups on the planet after releasing its chatbot ChatGPT in late 2022. The technology allows users to enter easy text queries and receive intelligent and artistic responses that may result in more detailed conversations.

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Microsoft has poured billions of dollars into the startup, with the whole investment reportedly rising to $13 billion thus far. The tech giant has effectively turn into a pioneer in developing basic AI models due to its investment in and partnership with OpenAI.

“It's hard to help but conclude that Microsoft's decision was heavily influenced by ongoing competition and antitrust scrutiny of its influence (and the influence of other major technology companies) over emerging AI companies like Open AI,” Alex Haffner, antitrust partner at law firm Fladgate, told CNBC by email.

“It's clear that regulators are paying close attention to the complex web of relationships that major technology companies have built with AI vendors, so Microsoft and others need to think carefully about how they structure these agreements going forward.”

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