Microsoft AI staff recruitment Inflection referred for UK merger investigation

LONDON – of Microsoft AI startup Inflection’s hiring of some former employees referred to initial UK merger probe

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, would have to be assessed to decide whether it constituted a merger under UK rules and as therefore it could lead to less competition within AI. sector.

If it finds reason to investigate further, the CMA can refer the case for a full investigation, known as a “Phase 2” probe. The CMA said it would announce a decision on whether to refer the case for a Phase 2 investigation by September 11.

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

The spokesman added that the company will provide the CMA with the information it needs to complete its investigations.

Microsoft announced in March that it had hired Suleyman from Inflection, along with a number of other key employees at the company.

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

In addition to Suleiman’s senior executive appointment, the Redmond, Washington-based tech giant tapped Karen Simonian to join the company as its chief scientist, reporting to Suleiman.

Both Suleyman and Simonyan were former employees of DeepMind, the artificial intelligence lab owned by Google.

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

Reports from Reuters and the Wall Street Journal state that Microsoft paid $650 million in licensing fees to Inflection to resell Inflection’s AI models through the Azure cloud platform;

For its part, Microsoft did not disclose the details of a licensing agreement with Inflection when it announced Inflection’s executive hiring, only taking on “several members” of the company’s 70-strong team.

The regulator is seeking to determine whether this, along with some hiring from Inflection, led to a merger that could ultimately lead to a “substantial lessening of competition” in the artificial intelligence space.

Earlier this year, the CMA said it was dropping a separate investigation into its investment in Microsoft shares and its partnership with French artificial intelligence startup Mistral.

The watchdog previously invited interested parties to comment on whether a separate agreement Amazon made with Anthropic, a prominent AI startup, is a merger.

The CMA has not yet said whether it will formally launch a review of this deal.

Microsoft has invested more than $13 billion in OpenAI. Alongside the funding commitment to the company, Microsoft is also using OpenAI’s GPT large language models to promote 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 has reportedly worried regulators, who are investigating the deal over competition concerns.

Amazon has invested $4 billion in Anthropic and offers the company’s Claude foundation models on Amazon Bedrock, the company’s managed AI service.