The software giant, however, maintains that its unique arrangement with the AI startup prevents it from being considered as having control over the company.

Unlike a traditional stake in a startup, Microsoft negotiated a deal that allows it to receive nearly half of OpenAI's financial returns until the investment is repaid, up to a predetermined cap. This unorthodox structure was devised due to OpenAI's status as a capped for-profit company operating within a non-profit organization, prompting questions about whether regulators see a distinction between the two.

Leading the inquiries, the UK Competition and Markets Authority announced on Friday that it is gathering information from stakeholders to assess if the collaboration between Microsoft and OpenAI threatens competition in the UK, where Google's AI research lab, DeepMind, is based. In parallel, the US Federal Trade Commission has also begun examining the nature of Microsoft's investment in OpenAI to determine if it may potentially violate antitrust laws.

It is important to note that these inquiries are preliminary, and no formal investigation has been initiated. Microsoft did not report the transaction to the agency, as it believes the investment in OpenAI does not equate to control over the company under US law. The US Federal Trade Commission is currently analyzing the situation and evaluating its options.

A Microsoft spokesperson emphasized that the company does not own any portion of OpenAI and simply receives a share of profit distributions. Furthermore, Microsoft president Brad Smith highlighted that their relationship with OpenAI is notably different from Google's outright acquisition of DeepMind. As part of the arrangement, Microsoft will have a non-voting observer on OpenAI's board, but it does not provide governing authority or control over the company's operations.

OpenAI echoed Microsoft's sentiment, stating that their partnership empowers them to pursue research and develop safe and beneficial AI tools independently. They emphasized that the non-voting board observer does not grant Microsoft governing authority or control over OpenAI's operations.

From the outset, both Microsoft and OpenAI aimed to establish their independence to investors, customers, and other stakeholders. Microsoft wanted to assure them that the company is not overly reliant on any one partner, while OpenAI sought to avoid being seen as solely an outpost of Microsoft. However, this careful positioning was disrupted by the recent firing and subsequent reinstatement of OpenAI's CEO Sam Altman, which demonstrated both Microsoft's lack of control and its influence within the company.

As the regulatory landscape unfolds, Microsoft may face a multitude of challenges. European regulators are also monitoring the situation, as OpenAI's activities in Germany have attracted attention from Germany's competition authority. If OpenAI increases its presence in the country, Microsoft's investment could potentially garner scrutiny due to its "material competitive influence" over the AI company.

The partnership between Microsoft and OpenAI could raise concerns about competition, particularly if Microsoft reduces its own AI research and development or if the investment inhibits OpenAI from collaborating with Microsoft's competitors. Antitrust analysts highlighted potential concerns regarding Microsoft's board observer, as it may grant the company access to OpenAI's plans without the authority to influence its decisions.

As the investigations progress, the tech industry and regulators will closely watch the outcome, as it may have implications for the future of collaboration between tech giants and cutting-edge AI startups.