Is It a 'Shortcut Acquisition'? UK Investigates MS Inflection Acquisition Process

Microsoft (MS) is under investigation by the UK competition authorities over its acquisition process of AI chatbot development startup Inflection.

On the 16th (local time), according to the Wall Street Journal (WSJ) and others, the UK Competition and Markets Authority (CMA) is investigating whether MS's recruitment of Inflection's co-founders and employees constitutes a merger or acquisition under UK regulations.

[Image source=Reuters Yonhap News]

In March, MS recruited Mustafa Suleyman, co-founder of AI company DeepMind, as the Chief AI Officer for MS's AI business. Suleyman is also a co-founder of Inflection, and most of the startup's 70 employees were hired together.

There have been suspicions that MS's hiring of Suleyman and Inflection employees was a covert acquisition of the AI startup to avoid antitrust scrutiny.

The CMA plans to examine whether MS's recruitment of Inflection's co-founders and employees constitutes a merger that could weaken competition in the AI sector. It will first initiate a preliminary investigation and proceed to an in-depth investigation if necessary. The CMA plans to announce by September 11 whether it will start a detailed investigation.

An MS spokesperson stated, "Talent recruitment promotes competition and should not be treated as a merger," adding, "We will provide the necessary information to promptly complete the CMA's inquiry."

As AI competition intensifies, US and European competition authorities are monitoring whether big tech companies are covertly acquiring startups with superior technology to avoid antitrust reviews. Instead of acquiring AI startups, they are reportedly only poaching talent and technology to evade antitrust regulations.

The US Federal Trade Commission (FTC) is also reported to be investigating MS's covert acquisition of Inflection. Earlier this month, US Senator Ron Wyden, chairman of the Senate Finance Committee, along with three other senators, sent a letter to the US Department of Justice and the FTC urging investigations into big tech's covert acquisitions.