The UK’s Competition and Markets Authority (CMA) has initiated a comprehensive investigation into Microsoft’s collaboration with AI startup Inflection. This follows Microsoft’s recruitment of Inflection founder Mustafa Suleyman and several of his colleagues earlier this year to spearhead a new AI division, alongside securing deals to utilize Inflection’s AI models.
The arrangement, criticized by regulators for bypassing the scrutiny of a direct acquisition, prompted the CMA in April to consider whether this transaction constituted a relevant merger. After a three-month comment period, the CMA gathered sufficient evidence to proceed with a full investigation, with a decision expected by September 11.
Microsoft has expressed confidence that its talent acquisition strategy fosters competition and should not be classified as a merger, pledging full cooperation with the CMA. Similarly, Inflection emphasized its rapid progress in implementing its enterprise product and strategy, while committing to cooperate with the investigation despite potential distractions from their commercial activities.
UK Regulator Investigates Microsoft’s AI Partnership with Inflection, Examines Potential Merger Implications
This scrutiny reflects broader regulatory concerns about competitive practices in the AI sector, highlighted by the EU antitrust chief Margrethe Vestager’s remarks on the circumvention of typical regulatory oversight by such arrangements.
The CMA’s investigation into Microsoft’s dealings with Inflection is part of a wider examination of competition issues in the AI industry. Concurrently, a similar inquiry into a deal between Microsoft and French AI startup Mistral was dropped by the CMA, whereas a deal between Amazon and AI lab Anthropic remains under scrutiny.
Amazon’s significant investment in Anthropic, along with the latter’s commitment to Amazon Web Services, is being assessed as a potential merger by the CMA.
Microsoft’s investment in OpenAI, the developer of ChatGPT, also draws regulatory attention. After initially securing a substantial investment in 2019 partly paid through cloud computing credits, Microsoft recently relinquished its “observer” seat on OpenAI’s board, opting instead for regular stakeholder meetings.
The CMA is now investigating this relationship further, especially after revisions to the description of Microsoft’s stake in OpenAI, shifting from a “minority owner” to a “minority economic interest.”
These investigations underscore the CMA’s vigilance over major tech companies’ influence in the burgeoning AI market. With Microsoft at the center of several significant AI-related deals, regulatory bodies are keen to ensure that competitive practices are maintained, avoiding monopolistic tendencies that could stifle innovation and fair market competition.
