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Federal antitrust regulators on Friday added weight to part of Elon Musk’s lawsuit seeking to prevent OpenAI from restructuring into a fully profitable company.
In a short presented to a federal court in California, lawyers for the Federal Trade Commission and the antitrust division of the Department of Justice did not directly support Musk. claims that OpenAI and Microsoft have colluded in an anticompetitive “de facto merger,” but they urged the court to be skeptical about one of the defenses made by OpenAI’s legal team.
OpenAI started as a non-profit venture, funded in part by Musk, and later became a for-profit company controlled by a non-profit board of directors. Is it now plan to completely separate from that nonprofit board and become a public benefit corporation, allowing them to be fiduciarily accountable to investors rather than beholden to a charitable mission.
A key contributor to the growth of OpenAI and the pressure to become a profitable business has been more than $13 billion in investments and other support that is received from Microsoft, a commercial company that competes in the AI 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. A chief executive of Microsoft, Dee Templeton, was a non-voting member of the board of OpenAI from November 2023 to July 2024.
Musk argued that the positions of Microsoft representatives on the board of OpenAI violated federal antitrust laws that prohibit anyone from serving on the governing board of competing companies, which is known as interlocking directions. OpenAI responded by saying that the argument is moot because neither Hoffman nor Templeton are members of OpenAI’s board anymore.
Attorneys for the FTC and the DOJ, however, wrote that “terminating an interlocking direction, for example, by having a person resign from a company board, is not enough, by itself, to discuss a claim under Section 8 of the Clayton Act. … In resolving this matter, the Court should not hold otherwise.”
Federal agencies have not weighed in on several of Musk’s other allegations, including that OpenAI CEO Sam Altman misled him and conspired with Microsoft to convince investors not to fund Musk’s own AI startup, xAI.
While the lawsuit has often taken on the tone of a soap opera feud between billionaires, the FTC and DOJ filing is another sign that regulators are keeping a close eye on OpenAI’s transition plans. Delaware’s attorney general filed a brief in the case and she said she would act if it believes that OpenAI violates the law and Meta asked the California attorney general’s office to block OpenAI’s restructuring.
