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UK competition regulator seeks input on Microsoft and OpenAI partnership

Written by Wed 13 Dec 2023

The UK’s Competition and Markets Authority (CMA) has requested comments from third parties on the partnerships between Microsoft and OpenAI.

The competition regulator is particularly interested in understanding whether this partnership qualifies as a merger that could affect competition in the UK and, if so, what impact it might have.

“The invitation to comment is the first part of the CMA’s information-gathering process and comes in advance of launching any phase 1 investigation, which would only happen once the CMA has received the information it needs from the partnership parties,” said Sorcha O’Carroll, Senior Director for Mergers at the CMA.

The competition regulator said it has been closely monitoring the impact of partnerships and agreements that could weaken competition in foundation model development.

The competition regulator added the partnership between Microsoft and OpenAI represented a close, multi-faceted relationship between the two firms with significant activities in foundation models and related markets.

The CMA will review whether the partnership has resulted in an acquisition of control, or change in control, by one entity over another. The CMA defined this as when one party has material influence, de facto control, or more than 50% of the voting rights over another entity.

It said the speed at which AI is scaling across use cases and markets have been unrivalled in economic history. The competition regulator added that, paired with advances in powerful foundation models, this is a pivotal moment in the development of AI.

The CMA’s recent report into the evolving market for foundation models highlighted opportunities and risks for competition and consumer protection. These were encapsulated in a set of proposed principles aimed at guiding the market’s development toward positive outcomes for people and businesses.

The CMA stressed that the need for sustained competition between AI developers is critical among its principles. This will help deliver innovation, growth, and responsible practices across the sector.

The requirement for open and effective competition in the deployment of foundation models across a range of downstream activities was also emphasised.

Alongside this review, the CMA is ongoing in its examination of foundation models’ implications for competition and consumer protection.

An update to the examination will be published in March 2024. Information will include how foundation model developers are accessing key inputs through investments, mergers, acquisitions, and partnerships.

The CMA is also progressing its cloud infrastructure market investigation to consider whether there are competition concerns. If this is found to be the case, the competition regulator will consider what interventions can improve the supply of these important services for UK customers.

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Written by Wed 13 Dec 2023

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