(Bloomberg) -- Microsoft Corp.’s investment into Inflection AI avoided in-depth scrutiny from the UK antitrust watchdog after it ruled that the mass hiring of ex-employees from the startup didn’t cause any regulatory concerns.
The Competition and Markets Authority said Wednesday that while the tie-up was classed as a merger, it won’t substantially reduce competition in the sector.
The decision to greenlight the deal comes after the agency’s scrutiny of several planned investments in artificial intelligence companies by big tech as the industry has poured money into startups in the emerging field. The probes highlight worries that the Silicon Valley companies were using this as a way to control and shape the market in the future.
“Inflection AI is not a strong competitor to the consumer chatbots that Microsoft has developed directly with Copilot and in partnership with OpenAI,” Joel Bamford, the CMA’s executive director for mergers, said in a Linkedin statement.
The CMA had the power to look at the arrangement as “the transfer of assets or employees – can be regarded as a merger where the transfer includes not just assets or employees but also enables a particular business activity to be continued,” it said.
Despite the clearance of the partnership, the CMA’s decision sent a signal to firms that the CMA is concerned with the growing issue the growing issue of funding startups in order to acquire their employees. The agency has now set in stone that it has the powers to look at these sorts of deals and will call them in for investigation if they see fit.
A spokesperson for Microsoft said it was pleased with the CMA’s decision.
In March Microsoft agreed to pay Inflection $650 million, largely to license its AI software, alongside the move to hire much of the startup’s staff.
Before that deal was announced, Microsoft hired Inflection co-founders Mustafa Suleyman and Karén Simonyan, along with most of the startup’s employees.
Britain’s CMA is at the global forefront of trying to police the boom of big tech investment into AI startups. Its study earlier in the year found that Silicon Valley firms could using the investments to further entrench their market power.
Since then, the CMA has opened probes into Microsoft’s OpenAI investment and its partnership with Mistral AI — which it closed at an early stage. Amazon.com Inc. and Alphabet Inc.’s Google’s deals with Anthropic AI are also being closely scrutinized.
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