The U.S. government has entered the fray in Elon Musk’s legal fight to prevent OpenAI’s transformation into a public company. On Friday, the Federal Trade Commission (FTC) and Department of Justice (DOJ) made a significant intervention, supporting Musk’s allegations of anticompetitive behavior involving OpenAI and its corporate partner, Microsoft.
Although the government bodies stopped short of taking sides in the case, they offered crucial legal insights ahead of a pivotal hearing set for Tuesday in Oakland, California. Musk, who co-founded OpenAI and now leads the AI startup xAI, accuses the company and Microsoft of violating antitrust laws through improper coordination.
Musk’s legal team has framed the involvement of the DOJ and FTC as a clear indication of the gravity of the situation. “The participation of the DOJ and FTC is a sign of how seriously regulators take OpenAI and Microsoft’s misconduct,” said Marc Toberoff, Musk’s attorney.
While Microsoft has refrained from commenting, OpenAI has dismissed the lawsuit as baseless, calling it a distraction lacking merit. The company, in a court filing, labeled Musk’s actions as harassment.
The FTC is separately scrutinizing AI collaborations, including the Microsoft-OpenAI partnership. The regulators are probing potential antitrust violations, as well as OpenAI’s adherence to consumer protection laws. Musk claims that OpenAI pressured investors to avoid funding its rivals and argues that the company’s close ties to Microsoft, especially with shared board members, constitute a conflict of interest.
In its defense, OpenAI contends that these board member connections are no longer an issue, as the individuals in question—Microsoft board member Reid Hoffman and executive Deannah Templeton—are no longer involved. However, the FTC and DOJ countered, emphasizing that directors, even after stepping down, may still hold competitive insights that could impact market dynamics. They also reiterated that observer-status board members are not exempt from antitrust regulations.
Musk’s lawsuit also points to a coordinated effort by OpenAI to suppress competition through an investor boycott, an allegation the FTC and DOJ suggest remains actionable, even if the boycott’s orchestrator was not a direct participant.
The case continues to unfold, with far-reaching implications for the future of AI and corporate governance.
