The U.K.’s antitrust regulator has started gathering information for a potential antitrust probe into Microsoft Corp.’s partnership with OpenAI.

The Competition and Markets Authority, or CMA, disclosed the move today. Shortly after the announcement, Bloomberg reported that the U.S Federal Trade Commission is also examining the partnership between Microsoft and OpenAI. The FTC’s inquiry is said to be in a preliminary stage.

As part of its review, the CMA will collect feedback on the Microsoft-OpenAI collaboration from the two companies and interested third parties. It plans to complete the process by Jan 3. Officials will use the collected information to determine whether to launch a formal antitrust investigation.

The first goal of the CMA’s review is to determine whether Microsoft’s collaboration with OpenAI qualifies as a so-called relevant merger situation. This is a regulatory term that describes transactions in which two companies “cease to be distinct.” The term can apply to not only acquisitions, but also other deals such as a transaction through which a company buys a stake in another business.

Microsoft reportedly invested $10 billion in OpenAI at the start of the year for a 49% stake. However, it’s believed the company hasn’t yet officially received that stake. The shares are expected to change hands only after Microsoft recoups its $10 billion investment through a profit-sharing agreement with OpenAI.

“The CMA will review whether the partnership has resulted in an acquisition of control – that is, where it results in one party having material influence, de facto control or more than 50% of the voting rights over another entity – or change in the nature of control by one entity over another,” the regulator stated. 

If the companies’ partnership meets one of those criteria, CMA officials will evaluate whether there may be a negative impact on market competition in the U.K. When the regulator finds that a deal breaches antitrust rules, it can unwind the transaction or order some of its terms to be changed. Earlier this year, Microsoft had to restructure its $68.7 billion acquisition of Activision Blizzard to receive regulatory approval in the U.K.

The CMA stated that it’s reviewing Microsoft’s collaboration with OpenAI because the partnership “represents a close, multi-faceted relationship” between two major players in the artificial intelligence market. The regulator also cited a “number of developments in the governance of OpenAI” as a factor behind its review. 

Last month, the AI developer ousted and then reinstated Chief Executive Officer Sam Altman (pictured, left, with Microsoft CEO Satya Nadella) within the span of one week. Following Altman’s return, most of the board members who voted to dismiss the executive stepped down. Microsoft will receive a nonvoting observer seat on the new board OpenAI is currently forming.

“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, a senior director for mergers at the CMA.

Separately, Bloomberg reported today that the FTC is also reviewing the Microsoft-OpenAI partnership’s antitrust implications. A source familiar with the matter told the publication that the inquiry is in a preliminary stage and the agency has not yet opened a formal investigation. The FTC is reportedly “analyzing the situation and assessing what its options are.”

Photo: Microsoft