US Backs Musk Challenge to OpenAI-Microsoft Board Overlaps (1)

The 2 US antitrust companies sided with a part of Elon Musk’s argument to block synthetic intelligence startup OpenAI from restructuring as a for-profit firm.

The Justice Division and Federal Commerce Fee argued in a court docket submitting Friday that overlapping board administrators can hurt competitors, even after the particular person in query resigns.

Musk’s lawsuit claims that OpenAI and Microsoft violated antitrust legal guidelines by having LinkedIn co-founder Reid Hoffman concurrently serve on the boards of each firms from 2017 to 2023. The lawsuit additionally cites Deannah Templeton, who served as an government at Microsoft and as a non-voting a part of OpenAI’s board from December 2023 to July.

“The place a defendant voluntarily ceases unlawful conduct, it nonetheless bears a ‘heavy burden’ to reveal it’s ‘completely clear that the allegedly wrongful conduct couldn’t moderately be anticipated to recur,’” the FTC and Justice Division mentioned. The companies mentioned they weren’t taking a place on the final word query of whether or not OpenAI may be restructured.

The submitting is available in response to Musk’s latest request {that a} federal court docket cease the corporate from pursuing what he known as an “unlawful” conversion to a for-profit firm. A listening to on the injunction request is ready for Tuesday in Oakland, California.

Musk’s efforts are a part of a months-long attack on OpenAI Chief Government Officer Sam Altman, greater than 9 years after the 2 males labored collectively to launch OpenAI as a nonprofit with a acknowledged mission to develop generative AI for the advantage of society.

The FTC has been scrutinizing OpenAI as a part of a number of probes. Final yr, the company opened a research, anticipated to be launched shortly, into the AI investments by Microsoft and different tech giants.

Individually, the buyer safety and antitrust company has been wanting into whether or not OpenAI misled shoppers about its choices. It has additionally been probing inappropriate board overlaps that contain Hoffman. He in flip has criticized FTC Chair Lina Khan, publicly calling for her ouster from the company.

Musk first suedOpenAI in California state court docket in February after which dropped the case in June. Musk revived the litigation in August in federal court docket.

Musk, who left OpenAI in 2018 and based rival startup xAI in 2023, alleged in earlier court docket filings that OpenAI broke its guarantees to him and deserted its founding function as a charity when it accepted billions of {dollars} in backing from Microsoft beginning in 2019. He additionally mentioned that with out fast court docket intervention, it is going to quickly be too late to cease Altman’s “behemoth” from crushing its rivals.

OpenAI declined to touch upon Friday’s submitting. It has beforehand argued that Hoffman and Templeton’s board stints didn’t run afoul of antitrust legislation.

OpenAI has known as Musk’s go well with baseless, arguing that the billionaire initially supported a extra conventional company construction for the startup.

Learn Extra: OpenAI Says Musk Backed For-Revenue Plan Earlier than Attempting to Cease It

The case is Musk v. Altman, 4:24-cv-04722, US District Courtroom, Northern District of California (Oakland).

(Updates with OpenAI’s authorized argument in eleventh paragraph.)

To contact the reporters on this story:
Rachel Metz in San Francisco at rmetz17@bloomberg.net;
Leah Nylen in Washington at lnylen2@bloomberg.net

To contact the editors chargeable for this story:
Anne VanderMey at avandermey@bloomberg.net;
Sara Forden at sforden@bloomberg.net

Peter Blumberg, Seth Fiegerman

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