Microsoft’s investment in Inflection AI will be the target of a major antitrust investigation in the UKafter the watchdog said it needed to take a closer look at the AI startup’s hiring of former employees.
The Competition and Markets Authority reported the opening of the first phase of a formal investigation into the corporate merger, set Sept. 11 as the deadline to decide whether to expand it to an in-depth investigation.
The agency quickly took action against big tech investments in AI startups after discovering a pattern of big tech companies pouring funds into startups.. There are concerns that companies in Silicon Valley will use these practices to control and shape emerging markets in the future.
It said it would use its powers under merger control rules to decide whether some of these deals could come under UK scrutiny, noting that some partnerships were not structured like traditional deals. Initially examining Microsoft’s investment in Mistral AI, but concluded that the technology company had not yet acquired the ability to materially influence Mistral’s commercial policies.
Microsoft’s deal with Inflection is what some would consider an “acquisition,” without the “acquisition” part. Microsoft agreed to pay Inflection US$650 million, mostly for the license software artificial intelligence, in addition to hiring most of the new company’s staffas stated at the time by someone familiar with the agreement.
Microsoft hired Mustafa Sulaimanas well as Karen Simonyanco-founder and chief scientific officer of Inflection, and most of the company’s employees earlier this year. Inflection, which has raised more than US$1.5 billion and issued a chatbots called PI, is still struggling to find an effective business modelsaid Suleyman after the launch.
“We believe that recruiting talent will encourage competition and should not be considered a merger,” Microsoft said. “We will provide the UK CMA with the information it needs to complete its investigation as quickly as possible.”
Microsoft isn’t the only big tech company recruiting AI startups. Amazon recently hired top executives and other employees from startup Adept AI Labsincluding its co-founder and former CEO, according to an internal memo Amazon provided to Bloomberg.
Besides that, Microsoft last week dropped plans to sit on OpenAI’s board, in a decision seen as a way to avoid increasing regulatory scrutiny. Regulators in the US and Europe have expressed concerns about Microsoft’s influence over OpenAI. UK regulators have not yet decided whether to open an investigation into the investment in OpenAI.
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