Microsoft Could Face Justice Department, FTC Probes Over Investment In ChatGPT Parent OpenAI

Technology giant Microsoft Corporation MSFT made headlines in early 2023 with a $10-billion investment in OpenAI, the parent company of ChatGPT.

A year later, Microsoft's partnership with OpenAI is drawing the attention of the U.S. Department of Justice and the Federal Trade Commission, which could result in future investigations.

What Happened: According to a report from Politico, the Justice Department and FTC are discussing which agency is able to probe OpenAI over its partnership with Microsoft. The complaint comes over antitrust concerns surrounding the partnership.

Politico said the FTC entered talks with the Justice Department months ago to seek out which agency would be best served to review the partnership. Both agencies want to go after the partnership and don't want to give up jurisdiction, which has led to a delay in a potential review, the report said.

Microsoft and OpenAI did not report the deal for review to the antitrust regulators, according to the report. Microsoft stated it does not have control of OpenAI, which is controlled by a nonprofit organization.

The hiring of OpenAI CEO Sam Altman by Microsoft days after he was fired by OpenAI is one factor in the antitrust concerns.

The Justice Department and FTC allege that the partnership of Microsoft and OpenAI could give the companies an unfair advantage in the artificial intelligence market.

Related Link: Microsoft’s Q1 Earnings Spotlight: Revenue Beat, EPS Jumps 27%, Rapid AI Infusion

Why It's Important: There is no rule against two federal agencies investigating on antitrust concerns, but one unit generally handles a case.

Politico highlighted a 2019 agreement between the FTC and Justice Department that the FTC would investigate technology giants Meta Platforms and Amazon over monopolization concerns, while Justice Department would target Google and Alphabet, splitting up four big tech companies.

The Justice Department ended up investigating Meta as well, which increased tension between the two agencies before the Justice Department dropped its pursuit, Friday’s report said.

The FTC said in a statement that the two organizations work "in harmony," as shared by Politico.

"Our join clearance process with the DOJ is seamless, and that lets both agencies effectively use their resources to protect American consumers from higher prices and unfair competition," FTC spokesman Douglas Farrar said.

Both agencies have looked to target the artificial intelligence sector. One potential caveat: the FTC does not have jurisdiction over nonprofits. The FTC is actively investigating OpenAI over potential consumer privacy issues, Politico said.

Along with the potential probe by the Justice Department and/or the FTC, OpenAI and Microsoft's partnership has drawn antitrust concerns from the UK's Competition and Markets Authority and the European Commission.

The European Commission said it was "checking whether Microsoft's investment in OpenAI might be reviewable under the EU Merger Regulation."

Microsoft is one of the largest companies in the world and has benefited from its investments in artificial intelligence, with shares hitting all-time highs.

MSFT Price Action: Microsoft shares are trading at new all-time highs in Friday’s session at $397.49 at last check. Shares of the technology giant are up 68% over the last year.

Read Next: Microsoft’s $13B Investment In OpenAI Comes Under Scrutiny Of European Competition Regulator

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