The U.K.’s Competition and Markets Authority (CMA) has initiated a review of Microsoft’s partnership with Inflection AI Inc., a startup that rivals OpenAI. This partnership, formed earlier this year, has drawn the attention of the CMA due to potential implications on market competition.
Inflection AI, founded in 2022, raised $1.3 billion in funding in 2023, with Microsoft being a significant contributor. The company has developed Inflection-2.5, a large language model (LLM) that claims to nearly match OpenAI’s GPT-4 capabilities. Microsoft invested in Inflection AI and hired its co-founder and CEO, Mustafa Suleyman, to lead its AI machine learning group. Additionally, Microsoft secured a nonexclusive license to Inflection-2.5 and recruited most of Inflection AI’s staff.
Focus of the CMA Probe
The CMA’s investigation, which began three months ago, has two primary areas of focus:
- Hiring Practices: The CMA will scrutinize Microsoft’s recruitment of Inflection AI’s workforce.
- Related Arrangements: The regulatory body will examine the agreements made between Microsoft and Inflection AI, including the nonexclusive licensing deal.
The primary objective is to determine if the partnership constitutes a “relevant merger situation,” a term that covers acquisitions and other partnerships where the entities involved cease to operate independently. If deemed necessary, the CMA may escalate the investigation to a Phase 2 probe, potentially leading to fines or mandated changes in business practices.
Microsoft’s Financial Details
Reportedly, the partnership cost Microsoft $650 million, with $620 million allocated for the licensing of Inflection AI’s technology. The remaining $30 million was part of an agreement ensuring Inflection AI wouldn’t sue Microsoft for hiring its former employees.
Microsoft has expressed confidence that the hiring practices enhance competition and should not be classified as a merger. The company has pledged to cooperate with the CMA to expedite the inquiry.
Microsoft’s Broader Implications
This scrutiny is part of a broader regulatory landscape where Microsoft’s partnership with OpenAI is also under examination. The European Union’s antitrust authorities are considering a review of the Microsoft-OpenAI deal, and the CMA has previously solicited feedback on the same.
The outcome of these investigations could significantly impact how tech giants form partnerships and integrate advanced AI technologies into their ecosystems.
Conclusion
As the CMA proceeds with its review, the tech industry and investors will closely monitor the developments. The probe’s findings could set precedents for future AI partnerships and mergers, influencing the strategic decisions of major technology firms.
See also: MOMENTUM AI London 2024
