The U.K.’s Competition and Markets Authority (CMA) has cleared Microsoft’s hiring of employees from Inflection AI, an artificial intelligence startup founded by DeepMind co-founder Mustafa Suleyman.
TakeAway Points:
- Microsoft’s hire of Inflection AI employees was approved by the U.K.’s CMA, which found no discernible decline in competition.
- According to the report, in order to improve Azure’s AI capabilities, Microsoft paid Inflection AI $650 million in licensing fees for the nonexclusive use of its intellectual property.
- Also, more regulatory scrutiny is being applied to Big Tech’s AI agreements, and Microsoft’s alliances are being examined by the FTC.
CMA approves Microsoft-Inflection agreement
The U.K.’s Competition and Markets Authority (CMA) has cleared Microsoft’s hiring of employees from Inflection AI, an artificial intelligence startup founded by DeepMind co-founder Mustafa Suleyman. The CMA announced on Wednesday that the deal does not warrant an in-depth competition investigation. The regulator concluded that the arrangement “does not give rise to a realistic prospect of a substantial lessening of competition (SLC) as a result of horizontal unilateral effects.” This decision follows an initial investigation launched in July to assess whether the hiring constituted a merger under U.K. rules.
The report mentioned that in March, Microsoft announced the hiring of Suleyman, who was appointed as the executive vice president and CEO of Microsoft AI. Alongside Suleyman, Karen Simonyan, another former DeepMind employee, joined Microsoft as its chief scientist. Both will play pivotal roles in Microsoft’s AI initiatives, including the development of Copilot, an AI assistant integrated into Windows and Microsoft 365.
Licenses and financial arrangements
The CMA’s investigation also examined Microsoft’s “entry into associated arrangements with Inflection,” which included a nonexclusive licensing deal to utilize Inflection’s intellectual property (IP) in various ways. Although Microsoft has not publicly disclosed the specifics of this licensing arrangement, reports from Reuters and The Wall Street Journal indicate that Microsoft paid Inflection $650 million in licensing fees. This deal allows Microsoft to resell Inflection’s AI models via its Azure cloud computing platform.
Joel Bamford, the CMA’s executive director, commented on the decision, stating, “Inflection AI is not a strong competitor to the consumer chatbots that Microsoft has developed directly in Copilot and in partnership with OpenAI.” This perspective was crucial in the CMA’s determination that the deal would not substantially reduce competition in the AI sector.
Wider regulatory focus
According to the report, the Inflection arrangement is not the only AI-related deal under scrutiny by regulators. The CMA is also investigating Microsoft’s multibillion-dollar investment in OpenAI, as well as a potential merger between Amazon and AI company Anthropic. Both Microsoft and Amazon have denied that their partnerships with smaller AI firms constitute mergers, emphasizing that these companies operate independently.
Meanwhile, the report highlighted that the Federal Trade Commission (FTC) of the United States is also investigating a number of agreements between big tech firms and AI startups, including Microsoft’s partnership with Inflection. These probes are part of a larger regulatory effort to make sure that big internet companies do not use partnerships and strategic acquisitions to suppress competition.
