UK antitrust regulators have launched a preliminary merger probe into Microsoft’s recent hiring of key employees from AI startup Inflection.
The investigation involves the recruitment of Mustafa Suleyman, Inflection’s co-founder, and a major portion of the startup’s staff.
The Competition and Markets Authority (CMA) will assess whether these hirings could be considered a merger under UK rules, potentially reducing competition in the AI sector.
The CMA announced it would decide by September 11 whether to advance the investigation to a more detailed “Phase 2” inquiry.
A Microsoft spokesperson said bosses are“confident that the hiring of talent promotes competition and should not be treated as a merger. ”
They added that the company would cooperate fully with the CMA’s inquiries.
In March, Microsoft announced the hiring of Suleyman, who now serves as the executive vice president and CEO of Microsoft AI.
The unit focuses on artificial intelligence products such as Copilot, an AI assistant integrated into Windows and Microsoft 365 software.
Additionally, Karen Simonyan was brought on as chief scientist, reporting to Suleyman.
Both Suleyman and Simonyan are former employees of DeepMind, Google’s AI lab.
The CMA did not specify how these hires might affect competition.
However, it mentioned examining Microsoft’s “entry into associated arrangements with Inflection,” beyond merely hiring its employees.
Reports from Reuters and The Wall Street Journal indicate Microsoft paid Inflection $650 million in licensing fees to resell its AI models via the Azure cloud platform.
Microsoft did not disclose details of this licensing arrangement when announcing the hires.
It only stated it had recruited several members of Inflection’s 70-person team.
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The regulator aims to determine if these actions constitute a merger that could significantly lessen competition in the AI industry.
Earlier this year, the CMA dropped an investigation into Microsoft’s equity investment and partnership with the French AI startup Mistral.
The CMA is also scrutinizing a separate deal involving Amazon’s investment in Anthropic, another prominent AI startup, to assess if it constitutes a merger.
Microsoft has invested over $13 billion in OpenAI and utilizes its GPT large language models for its own AI products, including the Copilot AI platform and Bing search engine.
Recently, Microsoft relinquished its nonvoting observer seat on OpenAI’s board, a move reportedly influenced by regulatory concerns.
Meanwhile, Amazon has invested $4 billion into Anthropic and offers the company’s Claude foundation models on its managed AI service, Amazon Bedrock.
