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The UK’s Competition and Markets Authority (CMA) has initiated an investigation into Microsoft’s recruitment of key personnel from the artificial intelligence startup Inflection. The inquiry aims to determine if this hiring move constitutes a merger under UK rules, potentially reducing competition in the AI sector.
The probe was triggered by Microsoft’s hiring of Mustafa Suleyman, Inflection’s co-founder, along with the majority of the startup’s staff. Suleyman was appointed as Microsoft’s executive vice president and CEO of Microsoft AI, a new division focused on advancing the company’s AI products, including the Copilot AI assistant. Additionally, Karen Simonyan, another former Inflection employee, joined Microsoft as its chief scientist, reporting to Suleyman.
Microsoft maintains that the hiring of talent should not be treated as a merger and expressed confidence that it promotes competition. The company has pledged to cooperate with the CMA and provide the necessary information for the inquiry.
The CMA’s initial investigation will determine if a more in-depth “Phase 2” probe is warranted, with a decision expected by September 11. This follows Microsoft’s announcement in March regarding the hiring of Suleyman and other key Inflection employees. Reports indicate that Microsoft also paid $650 million in licensing fees to Inflection to resell its AI models via the Azure cloud platform.
The CMA’s concern is whether these hires and the associated arrangements could lead to a “substantial lessening of competition” in the AI space. Previously, the CMA dropped an investigation into Microsoft’s investment and partnership with French AI startup Mistral and invited comments on Amazon’s deal with AI startup Anthropic.
Microsoft has significantly invested in AI, including over $13 billion into OpenAI, leveraging OpenAI’s GPT models for its products like the Copilot AI platform and Bing search engine. Amazon, with a $4 billion investment in Anthropic, offers Anthropic’s Claude foundation models on its Amazon Bedrock AI service.
The outcome of the CMA’s investigation will be closely watched, as it could have significant implications for the AI industry and its competitive landscape.