In a motion filed last Friday, Elon Musk, alongside representatives from his AI startup xAI and former OpenAI board member Shivon Zilis, requested a federal injunction to halt the restructuring of artificial intelligence company OpenAI into a fully for-profit public benefit corporation.
The court filing also accuses OpenAI of engaging in anti-competitive practices by allegedly pressuring its investors to avoid funding rival AI companies, including xAI.
Musk’s legal team argues that such agreements belittle fair competition in the AI market, which is projected to generate over $1 trillion in revenue within the next decade.
A Change from Non-Profit Origins
Founded in 2015 as a non-profit organisation, OpenAI’s initial mission was to advance AI research for the greater good.
However, the company pivoted in 2019 to a “capped-profit” model, allowing it to attract investments, notably from Microsoft, which has contributed nearly $14 billion to OpenAI to date.
Now, OpenAI is seeking to become a fully for-profit entity, a move Musk and his attorneys claim deviates sharply from its original mission.
Elon Musk, who was an early supporter of OpenAI, parted ways with the company in 2018 over disagreements regarding its direction. He has since spoken up about the firm’s profit-oriented approach and its potential monopoly in the AI sector, particularly with the adoption rate of ChatGPT.
Allegations of Anti-Competitive Behaviour
The filing alleges that OpenAI and its primary backer, Microsoft, have engaged in acts that limit competition. According to Musk’s attorneys, OpenAI has allegedly used its influence to ensure that investors avoid funding competing AI firms, a strategy they describe as a “group boycott.”
The motion further claims that Microsoft and OpenAI have benefited from shared competitively sensitive information, facilitated by overlapping board relationships.
Though Microsoft stepped down from its observer seat on OpenAI’s board earlier this year, there are still issues over the tech giant’s influence on the AI market.
OpenAI’s Response
OpenAI has dismissed Elon Musk’s claims as unfounded. A spokesperson described the legal action as a repetition of “baseless complaints” and maintained the company’s commitment to innovation and transparency.
Meanwhile, OpenAI continues to expand its reach, recently securing a valuation of $157 billion following a major funding round led by Thrive Capital.
The US Federal Trade Commission (FTC) has launched an inquiry into partnerships between AI developers and cloud service providers, naming companies like OpenAI, Microsoft, and Amazon as subjects of interest.
Elon Musk’s challenges also reiterate the competitive dynamics within the AI sector. His own AI startup, xAI, launched in 2023, has already introduced its Grok chatbot and is raising funding to scale its operations.
The company aims to carve out a role in the generative AI market, which has seen explosive growth this year.
What’s at Stake?
The outcome of this case could impact how AI companies scale through competition and corporate structure in the crowded marketplace. The questions over OpenAI’s ability to balance commercial interests with its founding commitment to societal benefit are still awaiting responses.
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