Microsoft "acquihire" Inflection AI. Now, UK's antitrust digs at this practice

Microsoft struck a $650 million deal with Inflection AI to “license and use its AI models” back in March. The Redmond tech giant’s practice of spending millions into investing in an AI company and then hiring its brightest employees is starting to backfire, as UK antitrust regulators are now formally investigating the partnership.

The UK’s Competition and Markets Authority (CMA) has set a September 11, 2024 deadline for its phase one merger investigation, opening comments from related interested parties. The antitrust body says that it needs to determine if this situation might lead to significantly reduced competition in any market for goods or services in the UK, and if the deal falls as a merger under the Enterprise Act 2002.

Microsoft hired Mustafa Suleyman, Inflection AI, to lead its new Microsoft AI organizations with several other key employees joining the Redmond company. This move has then sparked concern among remaining Inflection employees and potential hires, affecting the startup’s ability to attract talent.

If the investigation progresses to the phase two stage, that means Microsoft could lose strategic talent and face significant regulatory hurdles for its AI ambitions.

The US Federal Trade Commission (FTC) has also been investigating whether Microsoft’s deal with the AI startup was designed to evade antitrust scrutiny. In its probe, the FTC says that such transactions typically require reporting to antitrust agencies if valued over $119 million.

The FTC was then probing whether Microsoft orchestrated the deal to avoid regulatory review, concerned that tech giants could monopolize key AI technologies. Microsoft and Inflection AI have received subpoenas seeking details on their partnership negotiations dating back two years.