(Bloomberg) -- Microsoft Corp.’s investment into Inflection AI will get a full-blown UK antitrust probe, after the watchdog said it needed to take a closer look at the hiring of former employees from the artificial intelligence startup.
The Competition and Markets Authority said Tuesday it was opening the formal phase one merger probe into the partnership, setting a Sept. 11 deadline on whether to escalate it to an in-depth investigation.
The agency has been swift to act against big tech’s AI startup investments after it found a pattern of large tech firms piling money into start ups. It highlighted worries that the Silicon Valley companies were using this as a way to control and shape the nascent markets in the future.
It signaled that it would use its powers under merger control rules to decide whether some of these deals could fall under UK scrutiny, noting that some partnerships aren’t structured like a traditional deal. It initially looked at Microsoft’s investment into Mistral AI but found the tech firm hadn’t acquired the ability to materially influence Mistral’s commercial policy.
Microsoft’s Inflection deal was what some have characterized as an “acquihire” — without the “acquisition” part. Microsoft agreed to pay Inflection $650 million, largely to license its AI software, alongside the move to hire much of the startup’s staff, a person familiar with the arrangement said at the time.
Microsoft hired Mustafa Suleyman as well as Inflection’s Chief Scientist and co-founder Karén Simonyan, along with most of the startup’s employees earlier this year. Inflection, which had raised more than $1.5 billion and debuted a chatbot named PI, still struggled to find an effective business model, Suleyman had said after the launch.
“We are confident that the hiring of talent promotes competition and should not be treated as a merger,” Microsoft said. “We will provide the UK CMA with the information it needs to complete its inquiries expeditiously.”
Microsoft isn’t the only big tech company that has been heavily recruiting the staff of AI startups. Amazon.com Inc. recently hired top executives and other employees from startup Adept AI Labs Inc., including its co-founder and former chief executive officer, according to an internal memo Amazon provided to Bloomberg.
Separately, last week Microsoft dropped its plans to take board roles at OpenAI in a decision that was seen as a way to try and dodge growing regulatory scrutiny. Regulators in the US and Europe had expressed concerns about Microsoft’s sway over OpenAI. The UK regulator is still to make a decision on whether to open a probe into the OpenAI investment.
--With assistance from Amy Thomson.
(Updates with more information and background throughout)
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