Key Points:
- The UK Competition and Markets Authority (CMA) has approved Microsoft’s partnership with Inflection AI.
- The deal includes Microsoft hiring former Inflection AI employees, including a co-founder.
- The CMA determined that Inflection AI had minimal market share in the UK and did not significantly compete with Microsoft’s chatbots.
The UK’s Competition and Markets Authority (CMA) has officially cleared Microsoft’s partnership with Inflection AI, a machine learning and generative AI company. This decision followed a probe initiated in July to evaluate any potential competition concerns within the country’s AI chatbot market.
Details of the Partnership and CMA Investigation
As part of the partnership, Microsoft has hired several former Inflection AI employees, notably including Mustafa Suleyman, co-founder of Google DeepMind, who now leads Microsoft’s new AI unit.
Microsoft reportedly invested around $650 million in this deal, providing access to Inflection’s AI models and enabling the startup to reimburse its investors. High-profile investors in Inflection include former Microsoft CEO Bill Gates and ex-Google CEO Eric Schmidt.
The CMA’s probe focused on whether this partnership met the criteria for a “relevant merger situation” under the Enterprise Act 2002. After reviewing the deal, the regulator concluded that Inflection AI had a minimal presence in the UK market and posed no significant competition to Microsoft’s existing chatbots.
Inflection’s AI-powered chatbot, Pi, has been available in the UK since May 2023, but it has not gained significant traction. The CMA’s analysis also found that Inflection’s focus on emotional intelligence (EQ) in its AI models was not a major competitive constraint, as these innovations could be replicated by others in the industry.
Inflection AI’s Operations and Broader Regulatory Landscape
Founded in 2022, Inflection AI has focused on developing foundational models and AI applications such as chatbots, while also beginning an AI studio business aimed at enterprise customers. Despite these activities, the CMA determined that Inflection AI’s operations were not substantial enough to impact competition in the UK market significantly.
This approval marks Microsoft’s second regulatory success in the UK AI sector in 2024. In May, the CMA cleared Microsoft’s partnership with the French AI startup Mistral AI, citing no significant competition concerns. Meanwhile, the CMA is also scrutinizing Amazon’s partnership with Anthropic and may launch further investigations into Alphabet’s deal with the same AI startup.
The regulatory approval signals continued interest and scrutiny from authorities as big tech companies deepen their investments in AI partnerships.
