Microsoft faces UK antitrust investigation over hiring of Inflection AI staff

UK regulators are now formally investigating Microsoft’s hiring of Inflection AI staff, months after most of Inflection’s staff joined Microsoft’s new AI division. The UK’s Competition and Markets Authority (CMA) is now opening up a phase one merger investigation into the partnership, with a September 11th deadline over whether the investigation will progress into a second phase.

If the case progresses to the phase two stage, then it could present a stumbling block for Microsoft’s AI ambitions. The CMA last signaled a more in-depth review of Microsoft’s $68.7 billion acquisition of Activision Blizzard in 2022, eventually forcing the company to restructure its deal and give up key cloud gaming rights in the UK and many other markets worldwide. It’s still early days for the CMA’s Inflection AI investigation, but the results could have an impact far beyond just the UK.

“We are confident that the hiring of talent promotes competition and should not be treated as a merger,” says Microsoft spokesperson Robin Koch in a statement to The Verge. “ We will provide the UK Competition and Markets Authority with the information it needs to complete its enquiries expeditiously.” 

Regulators in the UK and EU have been increasingly looking at the AI partnerships and investments that Big Tech are making. The CMA also signaled interest in Microsoft’s Mistral AI partnership but decided that it didn’t qualify for investigation under its merger rules.

Microsoft was also recently charged with EU antitrust violations for bundling its Teams app with Office 365 and Microsoft 365 subscriptions. If Microsoft is found guilty of antitrust violations in the EU, the firm could face a fine of up to 10 percent of the company’s annual worldwide turnover. Microsoft also recently reached a settlement with a cloud industry group in Europe to avoid a potential antitrust battle.

Update, July 16th: Article updated with a statement from Microsoft.