Microsoft faces UK antitrust probe after hiring Inflection AI founders and employees

Microsoft is facing a full regulatory probe in the U.K. after the tech giant hired the core team behind Inflection AI, a U.S.-based OpenAI rival in which Microsoft had previously invested.

The Competition and Markets Authority (CMA) today announced that it’s launching a “phase 1” merger inquiry, which kicks off a 40-working day investigative period where it will gather evidence and decide whether to proceed with a full probe.

The news comes four months after Microsoft CEO Satya Nadella launched a new consumer AI division spearheaded by the founders of Inflection AI, including deep learning scientist Karén Simonyan and Google DeepMind co-founder Mustafa Suleyman. At the same time, Nadella confirmed that a number of other Inflection AI members had joined Microsoft’s new AI unit (Bloomberg reported that most actually joined), one of whom was Jordan Hoffmann, an AI scientist and engineer who is now heading up Microsoft’s U.K. AI hub in London.

At the heart of the concerns is that big tech companies are adopting a new M&A approach designed to circumvent regulatory scrutiny around AI, in what some have dubbed the “quasi-merger,” which may involve anything from strategic investments to scooping up startup founders and technical talent.

Multi-pronged investigations

Today’s announcement doesn’t come as a massive surprise, as the CMA revealed in April that it was conducting preliminary enquiries into a triumvirate of AI partnerships. One of those was Microsoft’s recent investment in Mistral AI, a French startup (and double unicorn) working on AI foundation models. It didn’t take long for the CMA to conclude that the investment didn’t qualify for investigation under current merger regulations, given that Microsoft’s stake of less than 1% wouldn’t give the tech giant any meaningful clout in the future direction of the startup.

The CMA is also currently looking at Amazon’s $4 billion investment in U.S.-based AI company Anthropic, while it is also expected to launch a full probe into Microsoft’s close partnership with ChatGPT-maker OpenAI, similar to the European Commission in the EU.

With the phase 1 inquiry now under way, the CMA has until September 11 to reach a decision on whether the hiring is tantamount to a “merger,” and if it is, whether it’s likely to damage competition in the United Kingdom. If the CMA decides that it does, it will then proceed the case to a more in-depth “phase 2” probe which can take around six months.