Microsoft hires AI Inflection staff for UK merger research

LONDON — Microsoft’s the hiring of certain former employees of artificial intelligence startup Inflection has been referred for an initial merger investigation in Britain

Britain’s Competition and Markets Authority said on Tuesday that the hiring of Inflection co-founder Mustafa Suleyman, along with most of the startup’s staff, should be assessed to decide whether it constitutes a merger under UK rules and would therefore can result in less competition within AI. sector.

If the CMA finds reason to investigate further, it may refer the matter for an in-depth investigation, known as a “Phase 2” investigation. The CMA said it would announce a decision before September 11 on whether to refer the case for a phase 2 investigation.

A Microsoft spokesperson told CNBC in a statement on Tuesday that it is “confident that hiring talent promotes competition and should not be treated as a merger.”

The spokesperson added that the company would provide the CMA with the information it needs to complete its investigation.

Microsoft announced in March that it had hired Inflection’s Suleyman, along with several other key company employees.

Suleyman was named Microsoft’s executive vice president and CEO of Microsoft AI, a newly created unit of the company focused on its artificial intelligence products, including Copilot, the company’s AI assistant, which it integrated into its Windows and Microsoft 365 software.

In addition to appointing Suleyman to a senior executive, the Redmond, Washington-based tech giant selected Karen Simonyan to join the company as chief scientist, reporting to Suleyman.

Both Suleyman and Simonyan were former employees of DeepMind, Google’s AI lab.

While the CMA did not outline in its statement on Tuesday how the deal could potentially undermine competition, the regulator previously said it was assessing Microsoft’s “entry into associated agreements with Inflection”, in addition to hiring employees.

This is evident from reports from Reuters and The Wall Street Journal Microsoft paid $650 million in licensing fees to Inflection to resell Inflection’s AI models through the Azure cloud platform.

Microsoft, for its part, does not reveal details of a licensing agreement with Inflection when it announced the hiring of Inflection staffers, only that it was hiring “several members” of the company’s 70-person team.

The regulator is trying to determine whether this, along with certain Inflection hires, has resulted in a merger that could ultimately lead to a “material reduction in competition” in the AI ​​space.

Earlier this year, the CMA said it would drop a separate investigation into Microsoft’s equity investment and partnership with French AI startup Mistral.

The watchdog previously invited interested parties to comment on whether there would be a separate deal Amazon created with Anthropic, a leading AI startup, constitutes a merger.

The CMA has not yet said whether it will formally review this arrangement.

Microsoft has invested more than $13 billion in OpenAI. In addition to pledging funding to the company, Microsoft is also using OpenAI’s major GPT language models to further develop its own AI products, including the Copilot AI platform and the Bing search engine.

And until last week, Microsoft had a non-voting observer seat on OpenAI’s board. However, this was reportedly a concern for regulators, who are investigating the deal over competition concerns.

Amazon has invested $4 billion in Anthropic and is offering the company’s Claude Foundation models on Amazon Bedrock, the company’s own managed AI service.