Musk’s Lawsuit Against OpenAI Receives a Boost from Lina Khan’s FTC (19459000)
Federal antitrust regulators added weight on Friday to certain portions of Elon Musk’s lawsuit that sought to prevent OpenAI’s restructuring into a for-profit only company.
In a brief filed in California with a federal district court, attorneys from the Federal Trade Commission (FTC) and the Department of Justice’s antitrust division didn’t directly support Musk’s claims that OpenAI has colluded with Microsoft in an anticompetitive “de-facto merger,” but they did urge a court to be skeptical of one of OpenAI’s legal defenses.
OpenAI was originally a non profit, partly funded by Musk. It then became a for-profit corporation controlled by a board of non-profit directors. It plans to separate completely from the non-profit board, becoming a public benefit company. This will allow it to be more accountable to investors and less dependent on a charitable mission.
Microsoft, a publicly-traded company that competes on the AI market, has invested more than $13billion in OpenAI and provided other support. This has contributed to its growth and pressure to become a profitable enterprise. Reid Hoffman, the LinkedIn founder, is a Microsoft board member and was a board member of OpenAI until March 2023. Dee Templeton was a top Microsoft executive who served as a non-voting board member of OpenAI from November 2023 to July 2024.
Musk has argued the Microsoft representatives’ positions in the OpenAI board are in violation of federal antitrust laws, which prohibit anyone from serving on a governing board for competing companies. This is known as a “interlocking directorate”. OpenAI responded by saying that the argument is moot since neither Hoffman nor Templeton were members of OpenAI’s board anymore.
The FTC and DOJ lawyers wrote, however, that “ending an interlocking board, e.g. by having a person leave a corporate board is not enough, on its own to moot any claim under Section 8 Clayton Act.” The Court should not rule otherwise in resolving the matter.
The federal agencies did nothing about Musk’s other allegations, such as that OpenAI CEO Sam Altman lied to him and conspired to convince investors to not fund Musk’s AI startup xAI.
The lawsuit often has the tone of a soap-opera feud between billionaires. However, the FTC/DOJ filing is a sign that regulators are keeping a close watch on OpenAI’s plans for transition. Delaware’s Attorney General has filed a case and stated that she will take action in the event she believes OpenAI has violated the law. Meta has also asked the California Attorney General’s Office to block OpenAI restructuring.
