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The UK competition watchdog has officially launched an inquiry into Microsoft’s hiring of staff from start-up Inflection AI, as global regulatory scrutiny of investments by technology groups deepens.
The Competition and Markets Authority said on Tuesday that it had “sufficient information” in relation to Microsoft’s hiring of “certain former employees of Inflection AI and its entry into associated arrangements with Inflection, to enable it to begin an investigation”.
The move to launch a formal merger inquiry comes after the regulator in April invited comments about the Microsoft-Inflection tie-up, as part of broader concerns about dealmaking in the fast-developing AI industry.
The CMA said the deadline for it to escalate its probe to the next level was September 11.
Microsoft said it was “confident that the hiring of talent promotes competition” and that the Inflection deal “should not be treated as a merger”.
The tech group added that it would provide the CMA with “the information it needs to complete its inquiries expeditiously”.
Microsoft, which participated in a $1.3bn funding round for Inflection last year, paid $650mn in March to hire the start-up’s chief executive Mustafa Suleyman, co-founder of Google’s DeepMind, alongside several other team members, and to license its technology.
Inflection was founded as a consumer AI company in 2022, with a chatbot product called Pi. Since March, it has pivoted to selling enterprise AI software to businesses after most of its staff left to join Microsoft.
The move drew scrutiny from regulators and legal experts on grounds that it looked similar to an acquisition by Microsoft but was not subject to formal acquisition rules.
The CMA said in April that it was seeking views on whether the partnerships struck by Microsoft and Amazon with AI start-ups, including Microsoft’s deal with Inflection, “fall within UK merger rules”.
Microsoft and Inflection stressed at the time that the agreement was not an acquisition and that Inflection remained an independent company.
The tie-up is far from the only Big Tech AI deal that has drawn the attention of regulators in the US, EU and UK.
Microsoft this month gave up its seat as an observer on the board of OpenAI while Apple said it would not take up a similar position, amid growing attention by global regulators on investments in AI start-ups.
The European Commission said in June it was exploring the possibility of an antitrust investigation into the Microsoft-OpenAI tie-up after it said it would not proceed with a probe under merger control rules.
The Federal Trade Commission in the US has also begun scrutinising investments made by big tech companies including Microsoft, Amazon and Google into generative AI start-ups.
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