Microsoft is facing a significant regulatory investigation within the UK after the tech giant hired the core team behind Inflection AI, a US-based OpenAI competitor wherein Microsoft had previously invested.
The Competition and Markets Authority (CMA) today announced that they might open a “Phase 1” merger investigation, which begins a 40-day investigative period wherein they may gather evidence and choose whether to proceed with a full investigation.
The news comes 4 months after Microsoft CEO Satya Nadella launched a brand new consumer AI division led by the founders of Inflection AI, including deep learning scientist Karen Simonyan and Google DeepMind co-founder Mustafa Suleyman. At the identical time, Nadella confirmed that quite a lot of other Inflection AI members have joined Microsoft's recent AI unit (Bloomberg reported that almost all actually joined), one in all them was Jordan Hoffmann, an AI scientist and engineer who now heads Microsoft's UK AI hub in London.
At the center of the concerns is that major technology corporations are adopting a brand new M&A approach aimed toward evading regulatory scrutiny within the AI space. Some are calling this “Quasi-merger”, which may include every little thing from strategic investments to recruiting startup founders and technical talent.
Versatile investigations
Today's announcement comes as no surprise, because the CMA announced back in April that it was conducting preliminary investigations right into a triumvirate of AI partnerships. One of those was Microsoft's recent investment in Mistral AI, a French startup (and double unicorn) working on AI foundational models. It didn't take long for the CMA to conclude that the investment was not eligible for investigation under current merger rules, as Microsoft's lower than 1% stake wouldn’t give the tech giant any meaningful influence over the startup's future direction.
The CMA can be currently looking into Amazon's $4 billion investment in US AI company Anthropic and is anticipated to launch a full investigation into Microsoft's close partnership with ChatGPT maker OpenAI, just like the European Commission's within the EU.
With the Phase 1 investigation currently underway, the CMA has until 11 September to make a choice on whether the suspension amounts to a 'merger' and, if that’s the case, whether it could harm competition within the UK. If the CMA finds it does, it can move the case to a more in-depth 'Phase 2' investigation, which could take around six months.
