Musk’s lawsuit against OpenAI gets support from Lina Khan’s FTC

Federal antitrust regulators on Friday added weight to parts of Elon Musk’s lawsuit that seeks to block OpenAI from restructuring itself into a fully for-profit company.

In a Brief It was filed in federal court in California, and lawyers for the Federal Trade Commission and the Justice Department’s antitrust division did not directly support Musk’s lawsuit. Claims That OpenAI and Microsoft had colluded in an anticompetitive “de facto merger,” but urged the court to question one of the defenses put forward by OpenAI’s legal team.

OpenAI started as a nonprofit, partly funded by Musk, and then transformed itself into a for-profit company controlled by a nonprofit board of directors. that it Plan now To separate completely from this non-profit board and become a public benefit corporation, allowing it to be fiduciarily accountable to investors rather than beholden to a charitable mission.

A major contributor to OpenAI’s growth and pressure to become a profitable company has been the more than $13 billion in investments and other support it has received from Microsoft, a publicly traded company competing in the AI ​​market. Reed Hoffman, founder of LinkedIn, is a member of Microsoft’s board of directors and was a member of OpenAI’s board of directors until March 2023. A senior Microsoft executive, Dee Templeton, was a non-voting member of OpenAI’s board of directors from November 2023 until July 2024.

Musk argued that the positions of Microsoft representatives on OpenAI’s board violate federal antitrust laws that prohibit anyone from serving on the board of directors of competing companies, which is known as an interlocking directorate. OpenAI responded by saying the argument is moot because neither Huffman nor Templeton are on OpenAI’s board anymore.

However, the FTC and DOJ lawyers wrote that “the termination of an interlocking directorate, for example, through the resignation of a person from a company’s board of directors, is not sufficient, by itself, to raise a claim under Section 8 of the Clayton Act. … In resolving this issue, the court should avoid ruling otherwise.

Federal agencies have not looked into Musk’s numerous other claims, including that OpenAI CEO Sam Altman misled him and conspired with Microsoft to persuade investors not to fund Musk’s artificial intelligence startup, xAI.

While the lawsuit has often taken on the nature of a feud between billionaires, the FTC and DOJ filing is another sign that regulators are closely monitoring OpenAI’s transition plans. The Delaware Attorney General filed a brief in the case and She said she would take action If it believes that OpenAI is violating the law and He asked Meta California Attorney General’s Office to block OpenAI restructuring.