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Federal antitrust regulators on Friday added weight to parts of Elon Musk’s lawsuit seeking to prevent OpenAI from turning itself into a wholly for-profit company.
a short Attorneys for the Federal Trade Commission and the Justice Department’s antitrust division, who filed the lawsuit in federal court in California, did not directly support Musk’s claims. claims OpenAI and Microsoft have reached a deal in a competitive “de facto merger,” but they urged the court to cast doubt on one of the defenses made by OpenAI’s legal team.
OpenAI started as a non-profit organization funded in part by Musk and later transformed itself into a for-profit company run by a non-profit board. this is planning now breaking away entirely from this nonprofit board and becoming a public benefit corporation allows for a fiduciary responsibility to investors rather than being tied to a philanthropic mission.
A major contributor to OpenAI’s growth and transformation into a profitable business has been more than $13 billion in investment and other support from publicly traded Microsoft, a competitor in the artificial intelligence 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. Dee Templeton, a senior Microsoft executive, was a non-voting member of the OpenAI board from November 2023 to July 2024.
Musk argued that the positions held by Microsoft representatives on OpenAI’s board violated federal antitrust laws that prohibit someone from serving on the boards of competing companies, known as interlocking directorships. OpenAI responded by saying that the argument was moot because neither Hoffman nor Templeton is a member of the OpenAI board anymore.
However, the FTC and DOJ lawyers wrote that “the termination of interrelated management, eg, by an individual’s resignation from a corporate board, is not sufficient by itself to establish a claim under Section 8 of the Clayton Act. … In deciding this matter, the Court should refrain from ruling otherwise.”
Federal agencies have dismissed several of Musk’s other allegations, including that OpenAI CEO Sam Altman defrauded him and that he conspired with Microsoft to persuade investors not to fund Musk’s own artificial intelligence startup, xAI.
While the lawsuit often takes on the tone of a soap opera lawsuit between billionaires, the FTC and DOJ filing is another sign that regulators are closely watching OpenAI’s transition plans. Delaware’s attorney general filed a brief in the case and said that he will take action If it believes that OpenAI is violating the law and Meta asked The California Attorney General will block OpenAI’s rebuild.
