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Federal antitrust regulators on Friday added weight to parts of Elon Musk’s lawsuit to prevent OpenAI from turning into a for-profit company.
In a in short filed in federal court in California, lawyers for the Federal Trade Commission and the Department of Justice’s Department of Defense did not directly agree with Musk’s. what to say that OpenAI and Microsoft have joined forces in the competition against the “de-facto merger,” but urged the court to question one of the defenses made by OpenAI’s legal team.
OpenAI started as a non-profit, funded in part by Musk, and then turned into a for-profit company managed by a non-profit board of directors. It is so now to prepare completely separating itself from a non-profit organization and becoming a charitable organization, allowing it to be responsible to investors rather than to charity.
A major contributor to the growth of OpenAI and the push to make it a profitable business has been the over $13 billion investment and other support it receives from Microsoft, a publicly traded company that competes in the AI market. Reid Hoffman, the founder of LinkedIn, is a member of the board of Microsoft and was a member of the board of OpenAI until March 2023. The CEO of Microsoft, Dee Templeton, was a non-voting member of the board of OpenAI from November 2023 to July 2024.
Musk has said that Microsoft’s representatives on OpenAI’s board are violating federal antitrust laws that prohibit a person from serving on a rival company’s governing body, known as a board of directors. OpenAI has responded by saying that the argument is false because neither Hoffman nor Templeton are members of OpenAI’s board anymore.
Attorneys for the FTC and DOJ, however, wrote that “termination of joint leadership, for example, by allowing a person to resign from a corporate body, is not sufficient, by itself, to challenge the provisions under Section 8 of the Clayton Act. … In resolving this issue, the Court must refrain from doing otherwise.”
Government agencies have not looked into many of Musk’s other claims, including that OpenAI CEO Sam Altman misled him and conspired with Microsoft to persuade investors not to fund Musk’s AI startup, xAI.
While the case is often seen as a soap opera between billionaires, the FTC’s filing with the DOJ is another sign that regulators are keeping a close eye on OpenAI’s plans. The Delaware attorney general has filed a brief in the case and he said he would do something about it if they believe that OpenAI is violating the law and Meta asked California attorney general’s office to ban OpenAI reform.
