Microsoft will not face antitrust scrutiny in the UK over its recent investment in French AI startup Mistral AI, but the country's Competition and Markets Authority (CMA) said on Friday that the partnership was The company concluded that the company is not subject to an investigation based on the merger provisions. Enterprises Act 2002”.
The decision follows the CMA's review of Amazon and Microsoft's various AI investments and partnerships, including the Redmond-based company's $16 million investment in Mistral AI, an OpenAI rival that develops large-scale language models. It comes three weeks after revealing three early-stage investigations. Shortly after, Microsoft hired his team at Inflection AI, another of his rivals in OpenAI, essentially gutting the startup.
The CMA said it also cited Amazon's $4 billion investment in Anthropic, a US-based AI company that develops large-scale language models.
Semi-merger with Big Tech
Big Tech's latest tactics to avoid regulatory oversight by pursuing “quasi-mergers” to gain control of new technologies without outright acquisitions of startups have come under increasing scrutiny. This could be through investments, securing a board seat, hiring a founding team, etc.
In early 2024, the Federal Trade Commission (FTC) will investigate startup AI companies from Alphabet, Amazon, and Microsoft to establish whether “partnerships pursued by leading companies risk distorting innovation and undermining fair competition.” We have started an investigation into the investment.
The CMA's efforts are part of a similar regulatory push. Two of the recently announced Calls for Comments are still ongoing and could lead to formal detailed investigations. Still, it is understood that the CMA is abandoning the Mistral AI case on the basis that it does not “qualify” for investigation under existing rules.
Alex Hafner, competition partner at British law firm Floodgate, said the findings show that the structure of the partnership between Microsoft and Mistral AI does not give large companies enough rights or influence, at least when it comes to M&A regulations. He said that it suggests that. After all, it became a minority investment in Double Unicorn, which closed a $415 million round just a few months ago.
“In doing so, this decision vindicates Microsoft's stated position regarding the partnership,” Hafner said.
This “stated position” was that making a small investment is not enough to gain meaningful influence in the future direction of an emerging AI startup. If Microsoft's investment is converted into equity in the French startup's next round of funding, Microsoft will effectively own less than 1% of Mistral AI.
A Microsoft spokesperson said at the time of CMA's initial research announcement:
“We believe common business practices such as hiring talent and splitting investments into AI startups promote competition and are not the same as mergers.”
Microsoft spokesperson, April 2024
The CMA claims that Big Tech companies may be adopting new techniques to protect themselves from antitrust scrutiny, while Microsoft has “significant influence over the commercial policy of Mistral AI”. He admitted that he had not given it.
A CMA spokesperson said: “The CMA has considered the information submitted by Microsoft and Mistral AI, as well as the feedback received in response to requests for comment.” “Based on the evidence, the CMA does not believe that Microsoft gained significant influence over Mistral AI as a result of the partnership and is therefore not subject to an investigation.”
Pollination work
Just last month, the CMA sounded the alarm about Big Tech's growing influence over the advanced AI market, expressing concern about the growing connectivity and concentration among developers in the snowballing field of generative AI. However, the CMA has now said that at least one deal on its radar will not be subject to investigation, suggesting that Big Tech's tactics to permeate the AI ecosystem broadly may be at work to some extent. It suggests that there is a sex.
But that still leaves two more unresolved cases: Amazon's huge investment in Anthropic and Microsoft's hiring of key talent for Inflection. Can we expect similar results there?
“The CMA concluded that the arrangement between Microsoft and Mistral was not sufficient to give Microsoft 'significant influence' over Mistral, the relevant bar exam,” Hafner said. . “Time will tell, but the application of the test here is therefore subject to greater clarity than in other AI partnerships the CMA is investigating.”
Admittedly, it's not so cut and dry. Anthropic landed Amazon's largest venture investment to date, accounting for more than half of his $7.6 billion that the AI company has raised since his founding three years ago. And while Inflection technically still exists, Microsoft has scooped up its founders and various key colleagues. In many ways, this was as good as an acquisition.
And let's not forget about the CMA's other, but related, ongoing case investigating Microsoft's close relationship with OpenAI. The regulator launched a formal “comments call” for AI and business stakeholders last year, and the European Commission (EC) followed suit in January.
Therefore, we probably shouldn't draw too many conclusions about other pending cases based on today's news.
“It is interesting that the CMA only confirmed the conclusions of the Mistral investigation. The CMA's ongoing investigation into the other two transactions and Microsoft's role in the open AI project remains unresolved,” Hafner said. . “Overall, therefore, it is clear that competition authorities continue to be very closely involved in developments in the field of AI, and that we will receive some further information from the CMA in the near future on the outcome of the ongoing work streams in this field.” We can look forward to the announcement.”