Microsoft’s acquisition-like arrangement with Inflection AI is now facing antitrust scrutiny in the United Kingdom.
The tech giant paid Inflection AI a $650 million “licensing fee” to use its AI models and hired most of its employees, including chief executive Mustafa Suleyman, back in March.
In the U.S., the Federal Trade Commission has reportedly been investigating whether Microsoft aimed to bypass regulatory scrutiny by hiring Inflection staff and paying the fee instead of purchasing the company outright. Mergers valued at over $119 million must be reported to federal antitrust enforcement agencies, and the FTC is looking into whether Microsoft’s deal was structured to sidestep these requirements.
On Tuesday, the Competition and Markets Authority (CMA) — the primary competition and consumer regulatory agency in the UK — announced it is also probing the deal. The agency stated it had “sufficient information” regarding Microsoft’s hiring of Inflection employees and its agreement with the AI firm to investigate whether the deal could be anti-competitive. A decision on whether to proceed with a further investigation will be made by September 11.
“We are confident that the hiring of talent promotes competition and should not be treated as a merger,” a Microsoft spokesperson said. “We will provide the UK Competition and Markets Authority with the information it needs to complete its inquiries expeditiously.”
Tech giants have been under scrutiny for anti-competitive practices, especially with the rise of AI driving competition and mergers. In the first half of 2024, tech sector deals in the U.S. totaled $186 billion, the largest of any industry, according to consulting firm EY.
In addition to Microsoft’s unusual deal with Inflection, Amazon has invested $4 billion into AI startup Anthropic to use its technology, and Apple acquired Canadian startup DarwinAI earlier this year, adding to its series of quiet AI acquisitions.
As a result, the Department of Justice and the FTC have reportedly agreed to investigate Microsoft, Nvidia, and OpenAI for potential anti-competitive behavior in the AI sector, according to The New York Times.