Microsoft Cleared in Inflection

AI Merger Antitrust Probe

 

 

UK regulators have cleared Microsoft of antitrust violations related to its deal with Inflection AI. Learn how the CMA ruled and what it means for AI competition.

UK Regulators Clear Microsoft in AI Talent Merger

 

The UK’s Competition and Markets Authority (CMA) has officially cleared Microsoft of any anti-competitive conduct in its recent deal involving Inflection AI. Despite the deal appearing like a simple hiring spree, the CMA classified it as a merger under UK law.

Although Microsoft hired many Inflection AI employees, including its co-founders, and gained access to the startup’s AI models, regulators concluded that no laws were broken. The deal, estimated at over $650 million, sparked an investigation due to growing concerns over consolidation in the AI sector.

CMA: It Was a Merger, But Not Anti-Competitive

According to Joel Bamford, the CMA’s executive director of mergers, the authority’s investigation focused on whether the employee transfers and structural ties between the companies compromised competition.

“The preliminary examination determined that the employee transfers and other arrangements meant the two companies were no longer separate entities,” said Bamford.

However, he added that their review found no competitive harm in the AI market that would justify a deeper Phase 2 investigation.

Inflection AI was not seen as a direct competitor to Microsoft’s Copilot or ChatGPT, the latter developed in partnership with OpenAI. Based on this, the CMA concluded the merger would not significantly lessen market competition.

A Strategic Move That Raised Eyebrows

The controversy began in March 2024, when Microsoft hired Mustafa Suleyman, co-founder of both DeepMind and Inflection AI, to lead its new Microsoft AI division. Alongside him, Inflection’s CTO Karen Simonyan joined as chief scientist.

Soon after, the majority of Inflection’s 70-person workforce moved to Microsoft as well. This wave of hires prompted the CMA to question whether the deal was, in effect, a corporate acquisition disguised as a talent acquisition.

Microsoft also gained access to Inflection’s proprietary AI models, further fueling speculation.

Microsoft’s Response to the Investigation

In July, when the CMA first made its investigation public, Microsoft responded by defending its actions.

“We are confident that the hiring of talent promotes competition and should not be treated as a merger,” Microsoft said in a statement.

The company emphasized that recruiting skilled professionals benefits innovation and consumer choice. It argued that talent moves should not fall under the same scrutiny as traditional mergers.

However, the CMA disagreed with this interpretation, though it still found no anti-competitive implications in the deal.

Regulators Watching the AI Race Closely

Microsoft’s dealings with Inflection AI are not the only partnerships drawing regulatory attention. The company is also under the microscope for its partnership with OpenAI and its growing influence in the global AI market.

In Europe and the U.S., tech regulators are increasingly concerned that a few companies might dominate the emerging AI landscape. Deals like this one often test how far companies can go before triggering competition concerns.

Still, the CMA’s ruling shows that not all large-scale talent acquisitions are inherently anti-competitive.

What This Means for the AI Industry

The CMA’s ruling sets an important precedent. It suggests that employee acquisition, even en masse, does not automatically signal anti-competitive behavior, especially if the companies involved weren’t strong competitors in the same niche.

However, this won’t be the last time regulators scrutinize such deals. As companies race to secure top AI talent and capabilities, authorities worldwide will likely continue to monitor similar moves closely.

Key Takeaways:

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