Microsoft Avoids In-Depth UK Investigation Over Hiring from AI Firm Inflection

Key points

The UK's Competition and Markets Authority (CMA) ruled that Microsoft’s acquisition of certain assets and employees from Inflection AI doesn’t pose a significant threat to competition.

However, the CMA still considers the deal a merger under UK regulations.

The CMA continues to investigate Microsoft’s larger investments in the AI sector, including its involvement with OpenAI.

Microsoft has cleared a hurdle with the UK’s competition watchdog regarding its hiring of key employees from Inflection AI, an artificial intelligence startup co-founded by DeepMind’s Mustafa Suleyman. The UK’s Competition and Markets Authority (CMA) decided not to pursue a deeper investigation, stating that the deal doesn’t realistically lessen competition in the AI market.

Earlier this year, Microsoft announced that it had brought on Suleyman as Executive Vice President and CEO of Microsoft AI, along with other top talent from Inflection AI. The CMA initially flagged this as a potential merger, which could have impacted competition in the AI sector.

However, after careful consideration, the CMA concluded that while the arrangement qualifies as a merger under UK law, it doesn't harm competition significantly. Despite this, the regulator still recognizes the deal as a merger and is keeping a close watch on Microsoft’s other AI-related ventures, including its significant investment in OpenAI.

The CMA had previously raised concerns about how Microsoft’s hiring from Inflection might affect the competitive landscape but found no substantial risks after further review. Part of the arrangement included a licensing deal that allows Microsoft to use Inflection's intellectual property, though details of this deal have not been fully disclosed. Reports suggest that Microsoft paid $650 million in licensing fees to resell Inflection's AI models through its Azure cloud platform.

This isn’t the only Big Tech-AI startup partnership under scrutiny. The CMA is also investigating Microsoft’s investment in OpenAI and Amazon’s involvement with AI company Anthropic, assessing whether these arrangements could harm competition.

Microsoft and Amazon have both argued that their partnerships with smaller AI firms don’t amount to mergers and that these companies continue to operate independently. Meanwhile, the U.S. Federal Trade Commission is also reviewing multiple deals between Big Tech companies and AI startups, including Microsoft’s arrangement with Inflection AI.