Partners to Part Ways? OpenAI Weighs Antitrust Claims Against Microsoft

TradingKey - OpenAI's partnership talks with Microsoft have reached an impasse, potentially leading to a breakdown in their relationship, according to The Wall Street Journal. OpenAI seeks Microsoft’s approval for its transformation, while Microsoft wants assurance that its investment interests will be safeguarded. 

Insiders describe the negotiations as highly challenging. OpenAI is contemplating a "nuclear option" as a last resort: accusing Microsoft of anticompetitive practices during their collaboration. Analysts suggest this could jeopardize the two tech giants' six-year-long partnership.

OpenAI Aims for Transformation, Microsoft "Holds Back"

Last month, OpenAI announced its decision to transition from a for-profit to a non-profit entity, pending Microsoft's approval. Reports indicate Microsoft desires a greater stake in the new company than OpenAI is willing to offer. Despite months of negotiations, Microsoft has yet to grant approval. Failure to complete the transformation by the end of the year could cost OpenAI $20 billion in funding.

Additionally, disagreements have emerged over the terms of OpenAI's acquisition of startup Windsurf. Under the current agreement, Microsoft has access to all of OpenAI's intellectual property, but OpenAI wants to restrict Microsoft's access to Windsurf's IP due to the direct competition between Microsoft’s GitHub Copilot and OpenAI.

These disputes have fueled dissatisfaction among OpenAI executives, prompting discussions about the "nuclear option" of alleging anticompetitive behavior by Microsoft. Reports indicate OpenAI may seek a U.S. federal regulatory review of its contract terms with Microsoft to determine any antitrust violations and initiate a public relations campaign.

From Benefactor to Rival: Separation or Collaboration Still?

Before the relationship soured, OpenAI and Microsoft's collaboration was hailed as a landmark in tech history.

Microsoft initially invested $1 billion in OpenAI in 2019 to support AI development on its Azure cloud platform. Following ChatGPT's success, Microsoft gained a competitive edge in the AI landscape through this investment. It secured exclusive rights to sell OpenAI’s software tools via Azure and priority access to its technology. Subsequent investments have raised Microsoft's total stake to over $10 billion.

However, the two companies are now competing on various fronts. OpenAI is attempting to reduce its reliance on Microsoft, reportedly securing a cloud service deal with Google for additional AI model training resources. Microsoft is pursuing similar independence by integrating both internal and third-party AI models into its Microsoft 365 Copilot, previously heavily reliant on OpenAI's technology.

Sources reveal ongoing discussions to amend Microsoft's investment terms, including its future equity stake in OpenAI, but no agreement has been reached. 

In response to these rumors, both companies issued a joint statement expressing optimism about continuing their partnership in the coming years, despite ongoing negotiations.