Microsoft is facing a full regulatory investigation in the UK after it hired the core team from Inflection AI, a US-based rival to OpenAI in which Microsoft had previously invested.
The Competition and Markets Authority (CMA) today announced that it will open a “phase one” merger investigation, kicking off a 40-working day investigation period during which it will gather evidence and decide whether to proceed with a full investigation.
The news comes four months after Microsoft CEO Satya Nadella launched a new consumer AI division spearheaded by Inflection AI founders, including deep learning scientist Karen Simonyan and Google DeepMind co-founder Mustafa Suleiman. At the same time, Nadella confirmed that a number of other Inflection AI members have joined Microsoft's new AI division (Bloomberg reported that most of the additions were in fact members), including Jordan Hoffman, an AI scientist and engineer who now leads Microsoft's UK AI hub in London.
At the heart of the concerns are big tech companies embracing a new M&A technique designed to skirt regulatory scrutiny around AI: “quasi-mergers,” which can include anything from strategic investments to acquiring startup founders and tech talent.
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Today's announcement is not a huge surprise, as the CMA revealed in April that it was conducting preliminary investigations into three AI partnerships, one of which was Microsoft's recent investment in Mistral AI, a French startup (double unicorn) developing AI-based models. The CMA quickly concluded that with Microsoft's stake of less than 1%, the tech giant did not believe it had any meaningful influence over the startup's future direction and therefore the investment was not subject to investigation under current merger regulations.
The CMA is also currently investigating Amazon's $4 billion investment in US-based AI company Anthropic, while, like its European counterpart, the European Commission, is expected to launch an in-depth investigation into Microsoft's close partnership with ChatGPT maker OpenAI.
The stage one investigation is currently underway, and the CMA must make a decision by September 11 on whether the adoption amounts to a “merger” and, if so, whether it is likely to harm competition in the UK. If the CMA determines that it is, the matter will proceed to a more detailed “stage two” investigation, which could take around six months.