Microsoft is formally under investigation by the UK's CMA for its deal with Inflection AI

In March, Microsoft announced the creation of Microsoft AI, which would be led by the then Inflection AI co-founder Mustafa Suleyman and feature Inflection AI co-founder Karén Simonyan as Chief Scientist. The announcement also stated that some Inflection AI employees would join Suleyman and Simonyan at Microsoft AI. Reports emerged afterward that most of the Inflection AI team had joined Microsoft, including Jordan Hoffmann, currently in charge of Microsoft's AI hub in London.

Regardless, the deal was not handled as an acquisition, since a statement from Inflection confirmed that the company would continue operations, pivoting towards becoming an AI studio, creating, fine-tuning, and evaluating private models for customers. Inflection AI also confirmed it was working towards making its models available on cloud services and via a proprietary API, starting with Inflection-2.5 on Microsoft Azure.

About a month after that deal was completed, the UK's Competition and Markets Authority (CMA) opened invitations to comment on three relationships between tech giants and AI startups: Amazon and Anthropic, Microsoft and Mistral AI, and Microsoft and Inflection AI. Although the CMA has since deemed an investigation into Microsoft's relationship with Mistral AI unnecessary, the regulator recently announced that it would officially open a Phase 1 investigation into the Microsoft-Inflection AI deal.

Unlike the invitation to comments stage, a Phase 1 investigation is a formal inquiry into the conditions of the arrangement between both companies. More precisely, the CMA will gather information to determine if the deal between Microsoft and Inflection AI should count as a merger, despite efforts to make it look like it's not. Then if the CMA does determine the arrangement is a merger, it will evaluate whether it will negatively impact competition in the AI market in the UK. The CMA has set 11 September 2024 as a deadline to determine whether its Phase 1 findings motivate a Phase 2 investigation.