The UK's Competition and Markets Authority (CMA) has announced the closure of its investigation into the partnership between Microsoft and OpenAI, concluding that the collaboration doesn't meet the merger criteria under the 2002 Enterprise Act. The CMA stated that, considering all available evidence, particularly recent changes reducing OpenAI's reliance on Microsoft's computing power, it doesn't believe Microsoft currently controls OpenAI's commercial policies.

The CMA's investigation began in December 2023, prompted by concerns over whether Microsoft's multi-billion dollar investment in OpenAI constituted a reportable merger event. With the rapid adoption of AI technology across businesses, governments worldwide are grappling with appropriate regulatory frameworks. In its decision this week, the CMA acknowledged the complexities of regulating the AI industry, stating, "The AI industry is still rapidly evolving." During the investigation, the CMA noted the evolving nature of the Microsoft and OpenAI partnership.

The CMA's review considered the commercial realities of the Microsoft-OpenAI relationship and the formal terms of their agreements. In January, Microsoft adjusted some exclusivity obligations with OpenAI, including allowing OpenAI to build additional computing capacity to pursue projects like its $500 billion "Synapse" infrastructure initiative. Microsoft's announcement mentioned that this new agreement also included changes to the exclusivity of new computing capacity, shifting to a model where Microsoft holds preferential purchasing rights.

Microsoft welcomed the CMA's conclusion in a statement, saying the decision, based on a careful consideration of commercial realities, marks the end of the investigation. Furthermore, the CMA has also been examining collaborations between other large tech companies and AI businesses, such as Microsoft's licensing agreement with French AI startup Inflection. Last September, the CMA approved Microsoft's recruitment of top talent from Inflection to establish a new Microsoft AI department, further solidifying its position in the AI field.

Key takeaways:

1️⃣ The CMA concluded that Microsoft's partnership with OpenAI doesn't constitute a merger, ending the investigation.   

2️⃣ Regulators highlight the rapid evolution of the AI industry and the changing nature of partnerships.   

3️⃣ Microsoft adjusted its agreement with OpenAI, granting it greater independence.