Microsoft’s Big AI Move: The UK’s Antitrust Probe Into a Billion-Dollar Deal

Why the Competition and Markets Authority is Eyeing Microsoft’s Latest AI Acquisition

Introduction to the Issue:

• Microsoft is being investigated by the UK’s Competition and Markets Authority (CMA) over its acquisition of Inflection AI.
• Basically in this deal Microsoft was hiring some folks from Inflection AI and paying $650 million to access their AI models.

Key People Involved:

• In March, Microsoft brought on Inflection AI cofounders Mustafa Suleyman and Karén Simonyan along with several team members.
• Suleyman — today CEO of Microsoft’s AI division, and already been accused in the past for mistreating his employees.
• Simonyan is now the director of research at Microsoft’s AI division.

CMA’s Concerns:

• The CMA is concerned that the transaction could lead to less competition in the UK.
• The CMA also is reviewing whether Microsoft has breached U.K. merger rules and must provide better notice of anticompetitive matters in the future as part of its oversight efforts.

Initial Investigation:

• The Microsoft/Inflection AI deal as well and another investment by Amazon in Anthropic were both being scrutinized for input ever since April, according to CMA.
• Amazon is still in doubt, but the CMA is to do a Microsoft study

Merger Rules in the UK:

• Mergers—A merger can be investigated if it comprises two or more merging business entities and either exceeds £70 million in value, or where the joint enterprise(s) holds 25% of a UK wide market.
• While Inflection AI is still its own shop, it sounds like the agreement with Microsoft gives them non-exclusive rights to customer data and that might influence what investigators find.

Next Steps:

• The Phase One period will run until 11 September when the CMA will decide whether to proceed with a more in-depth Phase Two review.
• The CMA declined to provide additional comment, noting that it was still early in the investigation.

Global Regulatory Scrutiny:

• Microsoft is not home free even if it gets CMA thumbs up, as other questions await the software giant.
• It was launched in June, after the US Federal Trade Commission (FTC) raised questions as to whether what is ostensibly only a talent acquisition and investment still amounts to a merger.
• The FTC is also investigating Microsoft’s “equity stake” in OpenAI to determine if it limits competition.

Conclusion:

• The CMA’s probe into Microsoft’s deal with Inflection AI is the latest of an expanding number of reviews in Britain and abroad focussing on competition within tech.
• The result of this probe may affect the treatment under competition law and policy for similar transactions in future.