Musk’s Lawsuit Against OpenAI Gets a Boost From Lina Khan’s FTC

Federal antitrust regulators on Friday added weight to parts of Elon Musk’s lawsuit to prevent OpenAI from restructuring itself into a fully profitable company.

A brief In a federal court filing in California, attorneys for the Federal Trade Commission and the Department of Justice’s Antitrust Division did not directly support Musk. claim That OpenAI and Microsoft have come together in a competitive “de-facto merger,” however, prompted the court to be skeptical of a defense made by OpenAI’s legal team.

OpenAI started as a non-profit, funded in part by Musk, and then transitioned into a for-profit company controlled by a non-profit board of directors. it is Now the plan Completely separating from that nonprofit board and becoming a public benefit corporation, allows it to be fiduciarily accountable to investors rather than a charitable mission.

A key contributor to OpenAI’s growth and push to become a profitable business has been more than $13 billion in investment and other support from Microsoft, a publicly traded company that competes in the AI ​​market. LinkedIn founder Reid Hoffman is a board member of Microsoft and a board member of OpenAI until March 2023. A top Microsoft executive, Dee Templeton, was a non-voting member of OpenAI’s board from November 2023 to July 2024.

Musk has argued that the position of Microsoft representatives on the OpenAI board violated federal antitrust laws that prohibit anyone from serving on the governing boards of competing companies, known as an interlocking directorate. OpenAI’s response said the argument is moot because neither Hoffman nor Templeton is a member of OpenAI’s board.

FTC and DOJ lawyers, however, wrote that “the termination of an interlocking directorship, i.e., an individual’s resignation from a corporate board, is not sufficient by itself to state a claim under Section 8 of the Clayton Act. … In resolving this issue, courts should otherwise avoid holding.” “

Federal agencies ignored several of Musk’s other allegations, including that OpenAI CEO Sam Altman misled him and conspired with Microsoft to keep investors from funding Musk’s own AI startup, xAI.

While the case has often taken on the tone of a soap opera feud between billionaires, the FTC and DOJ filings are another sign that regulators are keeping a close eye on OpenAI’s transformation plans. The Attorney General of Delaware briefed the case and Dr He said he would take action If he believes that OpenAI is violating the law and Meta asked California Attorney General’s Office to Block OpenAI’s Reorganization