The UK Competition and Markets Authority (CMA) has initiated a Phase 1 investigation into Microsoft’s acquisition of the staff from Inflection AI. The investigation, unveiled today, will be followed by 40 working days to collect evidence and decide on the necessity of further investigation.
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The probe comes after Microsoft CEO Satya Nadella launched a new consumer-focused AI unit that includes key talents of Inflection AI, including deep learning scientist Karén Simonyan and Mustafa Suleyman of DeepMind. Other members of Inflection AI, such as AI scientist Jordan Hoffmann, have also moved to Microsoft, with Hoffmann now heading the firm’s AI division in London.
CMA expands oversight of AI collaborations and investments
Some have expressed fears that the new M&A strategy by the big tech firms, referred to as “quasi-mergers,” where strategic investments and buying of founders of startups and technical talent is also done. This strategy is considered a technique to avoid the conventional regulatory review.
The announcement was expected after the CMA carried out preliminary investigations in April on several AI collaborations, such as Microsoft’s investment in Mistral AI. The CMA said that Microsoft’s less than 1% stake in the French startup did not raise concerns under the existing merger rules.
The CMA has also raised concerns about Amazon’s $4bn deal with US-based AI company Anthropic and is expected to open another investigation into Microsoft’s tie-up with OpenAI similar to the European Commission.
Potential phase two investigation looms for Microsoft deal
With the phase one investigation already ongoing, the CMA has until September 11 to determine if Microsoft’s acquisition of Inflection AI employees is a merger and if it is anti-competitive in the UK. If the CMA finds that it does, the case will move to a more detailed phase two probe, which could take approximately six months.
The results of the CMA’s investigation could be potentially damaging to Microsoft’s AI plans. The company has had its fair share of regulatory issues, including the concerns raised over its $68. 7 billion acquisition of Activision Blizzard, which sees the firm restructure and relinquish cloud gaming rights in certain regions. The same result may be expected if the CMA considers the Inflection AI hiring as anti-competitive.
Microsoft representative Robin Koch stated that the strategies for hiring are competitive and do not constitute a merger. The company has committed to assist the CMA in the conduct of the inquiry in order to fast-track the process.
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