Microsoft’s “acqui-hiring” arrangement with Inflection AI is attracting antitrust scrutiny in the UK.
Microsoft paid Inflection AI $650 million as a “licensing fee” to use its AI models and hire most of its employees, including CEO Mustafa Suleyman, in March.
The U.S. Federal Trade Commission (FTC) is reportedly investigating whether Microsoft structured the deal to avoid antitrust regulations by paying the fee and hiring staff instead of outright purchasing the company. Any merger over $119 million must be reported to federal antitrust authorities, and the FTC is examining if Microsoft’s actions bypassed these requirements.
On Tuesday, the UK’s Competition and Markets Authority (CMA) announced it was also investigating the deal. The CMA stated it has “sufficient information” regarding Microsoft’s hiring of Inflection employees and their agreement with the AI company to explore whether the deal is anti-competitive. A decision on whether to proceed with a more detailed investigation will be made by September 11.
“We believe that hiring talent fosters competition and should not be viewed as a merger,” a Microsoft spokesperson said. “We will provide the UK Competition and Markets Authority with the necessary information to complete its investigation quickly.”
Tech companies are increasingly under scrutiny for anti-competitive practices, especially as AI advancements spark fierce competition and numerous mergers. In the first half of 2024 alone, U.S. tech sector deals totaled $186 billion, the highest in any industry, according to consulting firm EY.
In addition to Microsoft’s deal with Inflection, Amazon has invested $4 billion in AI startup Anthropic for its technology, and Apple acquired Canadian firm DarwinAI earlier this year, continuing its trend 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 practices in the AI sector, according to The New York Times.