CMA clears Microsoft and Inflection AI partnership after merger ruling

Britain’s competition regulator has today cleared Microsoft’s arrangements with Inflection AI, which included a licensing deal and the hiring of former Inflection employees.

The Competition and Markets Authority (CMA) announced in April it was looking at three separate deals that potentially fall under UK merger law and, if so, whether they could have a harmful anti-competitive effect on UK consumers and businesses.

The three partnerships were between Microsoft and Mistral AI, Amazon and Anthropic, and Microsoft’s arrangements with Inflection AI, a startup that says it is creating a ‘personal’ AI for everyone.

On Wednesday, the CMA said Microsoft and Inflection’s partnership does qualify as a merger that falls within the watchdog’s remit.

However, it cleared the deal on the grounds that it does not have concerns of a “substantial lessening of competition”.

In March, Microsoft announced that it had hired several former Inflection employees, which the CMA said amounted to nearly the whole team, including two of its co-founders, Mustafa Suleyman and Karén Simonyan.

Microsoft also entered into a number of arrangements with Inflection including a nonexclusive licensing deal to use Inflection’s intellectual property.

‘Inflection AI not a strong competitor to Microsoft’

In a Linkedin article, Joel Bamford, executive director of mergers at the CMA, said: “In this case, the evidence did not show competition concerns requiring a more in-depth phase two review.

“Inflection AI is not a strong competitor to the consumer chatbots that Microsoft has developed directly (Copilot) and in partnership with OpenAI (ChatGPT). On this basis, we cleared the transaction,” he added.

The regulator has already opened an invitation to comment into Microsoft’s partnership with OpenAI, the creator of ChatGPT.

In August, the CMA decided to drop two investigations into Google’s Play Store and Apple’s App Store, citing a shift in priorities as the regulator mulls how to apply its new powers under the recently introduced Digital Markets, Competition and Consumers Act (DMCC).