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Former OpenAI CEO gains strong legal backing with Microsoft

Should ousted OpenAI CEO Sam Altman be involved in any federal investigations going forward, he now has the legal backing of Microsoft as an employee.

Former OpenAI CEO Sam Altman was hired at Microsoft after being ousted by the OpenAI board Friday in a move that protected Microsoft's interests as an investor in the company. But it may also draw regulatory scrutiny if Altman's hiring becomes a step by Microsoft toward consolidating the AI market.

Though Congress has yet to advance any regulatory measures targeting artificial intelligence, the Federal Trade Commission (FTC) made it clear earlier this year that it's capable of investigating companies whose AI models raise concerns over privacy or discrimination. The FTC opened an investigation into OpenAI in July and asked the company for documents about how OpenAI addresses risks posed by its generative AI models, including the popular ChatGPT models. Before that, Italy banned ChatGPT after claiming the company violated the European Union's General Data Protection Regulation.

With Microsoft bringing Altman in to run an AI research team and the future of OpenAI unknown -- more than 500 OpenAI employees threatened to quit if the board doesn't step down -- there could be new challenges for agencies like the FTC looking to hold AI companies accountable.

"If I were a regulatory agency, this would certainly get my attention," said Sarah Kreps, director of the Tech Policy Institute in the Cornell Brooks School of Public Policy. "You have this generative AI firm that was already a behemoth partnering with a behemoth. That leads to a huge concentration of power in the hands of now one overarching entity."

Tech giants provide legal backing for AI startups

Microsoft was already a significant investor in OpenAI after its ChatGPT model rose to popularity starting in November 2022, igniting what Kreps called an AI "arms race." Tech giants Google and Amazon similarly invested in Anthropic, a competitor to OpenAI.

The large tech firms provide the AI startups with the resources to develop better and faster AI models, and they also provide established legal and policy teams that have been fighting "legal battles for decades," Kreps said.

If I were a regulatory agency, this would certainly get my attention.
Sarah KrepsDirector, Tech Policy Institute, Cornell Brooks School of Public Policy

"It will create more challenges for Congress," she said. "This was already a tough regulatory nut to crack."

Kreps said though she hasn't heard antitrust concerns about the evolving situation with Microsoft and OpenAI, she believes Altman is in a better position to deal with any potential government fallout with Microsoft's backing.

"Nothing is new under the sun for Microsoft, and they have a great team of law and policy people," she said. "I think they'll be in a better position to handle this than OpenAI was."

There could be concern about market concentration, particularly if more OpenAI employees join Microsoft, said Colin Levy, director of legal for contract management firm Malbek. However, given that there remain competitors in the space, it might not raise enough concern to garner the FTC's interest, he said.

"Overall, I think we have an unwanted soap opera unfolding before our eyes, and the final episode has yet to air," he said.

As for Congress, Kreps said she doesn't expect policymakers to act aggressively against the large tech firms and AI companies regardless of what happens with OpenAI. Businesses, including Microsoft and OpenAI, have made efforts to partner with the federal government to address AI safety concerns. Additionally, the U.S. is competing with China's AI advancements, which makes it hard for Congress to regulate the industry.

"Congress is reluctant to hamstring U.S. industry as it's trying to produce the tools and technologies we need to compete with China," she said.

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget Editorial, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

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