The UK’s CMA is Investigating Microsoft’s Hiring of Inflection AI Employees

The UK’s Competition and Markets Authority (CMA) announced today that it’s investigating Microsoft’s hiring of key staff from Inflection AI to determine if it could negatively impact competition in the AI space. This is just the first phase of the CMA’s merger inquiry, and the UK regulator has until September 11 to announce if it will proceed with an in-depth “phase 2” investigation.

“The Competition and Markets Authority (CMA) is considering whether it is or may be the case that Microsoft Corporation’s hiring of certain former employees of Inflection and its entry into associated arrangements with Inflection has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services,” the UK regulator said today.

Back in March 2024, Microsoft announced that two of Inflection AI’s co-founders, Mustafa Suleyman and Karén Simonyan would be joining the company’s new Microsoft AI division along with other members of the Inflection team. On this occasion, Suleyman became the head of this new AI division that brings together the company’s various AI efforts, and the new AI exec is reporting directly to Microsoft CEO Satya Nadella.

While Inflection AI remained an independent company, it also announced in March that it was now hosting its Inflection-2.5 model on Microsoft Azure. The Information reported at the time that Microsoft agreed to pay the AI startup $650 million to license its AI software.

If the UK’s CMA is still investigating Microsoft’s AI partnership with OpenAI, the company announced in May that the company’s separate partnership with French startup Mistral AI didn’t qualify for investigation. Still, to appease regulators, Microsoft recently gave up the observer seat on the OpenAI board it had since January.

“We are confident that the hiring of talent promotes competition and should not be treated as a merger,” Microsoft said today in a statement shared with Bloomberg regarding this new merger inquiry from the CMA. “We will provide the UK CMA with the information it needs to complete its inquiries expeditiously.”