Elon Musk Accuses OpenAI of Unfair Competition with Microsoft Ties and Seeks to Halt Its For-Profit Transition

Elon Musk Seeks Court Intervention to Halt OpenAI’s Shift to For-Profit Model

Elon Musk has taken legal action against OpenAI, requesting a US federal court to stop the AI company from transitioning into a fully for-profit business.

Musk's request comes as OpenAI accelerates its dominance in the AI space, raising concerns for the future of his own AI startup, xAI.

Musk argues that the restructuring threatens to crush competitors and fundamentally betrays the company's original mission, established ten years ago.

Legal Feud Intensifies Between Musk and OpenAI

This latest legal filing marks the fourth attempt by Musk to challenge OpenAI's move towards a profit-driven model.

Musk’s attorneys argue that the change violates OpenAI’s foundational purpose as a non-profit and would allow the company to unfairly control market dynamics.

They claim OpenAI has veered far from its original mission, dating back to 2015, when it was launched with the intention of developing generative AI for the public good.

Musk's lawyers wrote:

"OpenAI cannot lumber about the marketplace as a Frankenstein, stitched together from whichever corporate forms serve the pecuniary interests of Microsoft and Altman at any given moment."

Musk Targets Alleged Antitrust Violations

Central to Musk's motion is the claim that OpenAI, in partnership with Microsoft, has been pressuring investors to refrain from funding competitors, including Musk’s xAI.

The lawyers argue that this constitutes a violation of federal antitrust laws, particularly the Sherman Act.

They contend that OpenAI’s actions, alongside Microsoft’s $14 billion investment, effectively block competitors from securing vital funding.

Musk’s team is requesting the court to prevent OpenAI from entering agreements that allegedly restrict investor funding for rival companies, including his own.

They argue that the coordinated actions between OpenAI and Microsoft’s boards have created a “group boycott,” restricting essential investment opportunities for rival companies.

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Here&#39;s the breakdown of legal the motion for a preliminary injunction filed by Elon Musk &amp; what this means for Microsoft:<br><br>Antitrust Concerns:<br><br>Group Boycott: <a href="https://twitter.com/hashtag/Microsoft?src=hash&amp;ref_src=twsrc%5Etfw">#Microsoft</a>, alongside <a href="https://twitter.com/hashtag/OpenAI?src=hash&amp;ref_src=twsrc%5Etfw">#OpenAI</a>, is accused of engaging in a group boycott by conditioning investments into OpenAI on an…</p>&mdash; BlueCollarMillionaire (@TheReal_BCM) <a href="https://twitter.com/TheReal_BCM/status/1863186986514669799?ref_src=twsrc%5Etfw">December 1, 2024</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>cx

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The lawsuit also includes accusations that OpenAI has improperly benefited from competitively sensitive information gained through its ties with Microsoft.

Musk’s attorneys claim that OpenAI’s former structure as a capped-profit entity was intended to limit its ability to dominate the market, but the new changes risk undermining fair competition.

OpenAI Responds to Musk's Claims

OpenAI has strongly rejected Musk’s accusations.

A spokesperson for the company stated that Musk’s filing “again recycles the same baseless complaints” and is “utterly without merit.”

The company insists that it is within its rights to restructure and that its actions have not violated any laws.

Despite Musk's ongoing legal efforts, OpenAI is pressing forward with its plan to become a fully for-profit entity, a move that has drawn significant attention from both investors and regulators.

The Pressure Builds for xAI and Other Competitors

As OpenAI moves toward its new corporate structure, the pressure is mounting on Musk’s xAI.

Since its launch in 2023, Musk's AI startup has experienced rapid growth, recently valued at $50 billion, more than doubling since May 2024.

Despite this progress, xAI faces significant challenges, not only from OpenAI but also from other emerging AI companies like Anthropic and tech giants such as Google.

Musk’s legal challenge, along with the competition from these players, highlights the intense race for dominance in the rapidly expanding generative AI market, which is predicted to exceed $1 trillion in revenue within the next decade.

Microsoft’s Role Under Scrutiny

The legal filings also raise concerns about Microsoft’s influence over OpenAI.

Although Microsoft gave up its observer seat on OpenAI’s board in July 2024, the Federal Trade Commission (FTC) has continued to monitor the relationship between the two companies.

The FTC initiated a market inquiry earlier this year to examine the growing influence of major cloud service providers like Microsoft over AI developers.

This scrutiny reflects the broader concerns about anti-competitive practices in the sector as companies jostle for control over AI technologies.