The United Kingdom's Competition and Markets Authority (CMA) has wrapped up its inquiry into Microsoft's strategic investment in AI startup Inflection, concluding that the deal did not result in a significant lessening of competition.
Microsoft Avoids UK Antitrust Scrutiny
The CMA found that while Microsoft's actions constituted a "relevant merger situation," they did not pose an actual threat to competition. This decision means the regulator will not pursue further action against the tech giant.
A Quasi-Merger Investigation
This ruling is part of a broader trend in regulatory scrutiny, particularly regarding investments by big tech companies in AI startups. Similar deals may face closer examination for their competitive implications. The US Federal Trade Commission (FTC) has also been looking into Amazon's hiring of key personnel and technology licensing from another AI startup.
When is a Merger Not a Merger?
The CMA explained that its decision was based on the assessment of criteria for a relevant merger situation under the Enterprise Act 2022. The regulator noted that the acquisition of a group of employees and their knowledge could constitute an enterprise, especially when it enables a specific business activity to continue.
Microsoft's Inflection Deal
Microsoft had acquired Inflection's technology and hired most of its staff as part of a strategic investment. This move allowed Microsoft to gain access to Inflection's pre-existing foundation model and chatbot development capabilities. The CMA found that at least some of the activities previously carried out by Inflection were now under Microsoft's control, making it a merger for review purposes.
Next Steps
The full text of the CMA's decision will be published shortly on the agency's website. This development may signal that similar quasi-mergers involving big tech companies and AI startups could come under closer scrutiny in the future.
It remains to be seen how this ruling will influence future regulatory decisions regarding strategic investments and personnel hires by large technology firms.