UK Authorities Initiate Merger Investigation into Microsoft’s Hiring from AI Startup Inflection

Microsoft’s recruitment of key personnel from artificial intelligence startup Inflection has triggered an initial merger investigation by the UK’s Competition and Markets Authority (CMA). This probe seeks to determine if such hiring could be classified as a merger under UK regulations, potentially stifling competition within the AI sector.

The CMA’s action centers on the high-profile acquisition of talent including Mustafa Suleyman, co-founder of Inflection, who has been appointed as Microsoft’s executive vice president and CEO of the newly established Microsoft AI division. This division is tasked with overseeing the development of AI products like Copilot, which is integrated into Windows and Microsoft 365.

The investigation will explore whether Microsoft’s assimilation of Inflection’s technology and expertise, through hiring and potential licensing agreements, constitutes a merger that could diminish market competition. Microsoft has countered by stating that hiring such talent fosters competition and should not be viewed as a merger.

Additional concerns arise from the financial aspects of the relationship between Microsoft and Inflection, including a reported $650 million in licensing fees paid by Microsoft to use Inflection’s AI models on its Azure cloud platform. These elements contribute to the CMA’s assessment of whether the integrations could significantly lessen competition in the rapidly evolving AI landscape.

This investigation follows on the heels of the CMA’s recent decision to drop a probe into Microsoft’s dealings with another AI firm, Mistral, but it continues to scrutinize the broader impacts of major tech companies’ expansions into AI through acquisitions and strategic hires. As part of this wider scrutiny, the CMA has also invited commentary on Amazon’s dealings with AI startup Anthropic, reflecting a growing regulatory focus on the competitive dynamics within the AI industry.