The CMA's investigation into the Google-Anthropic partnership is officially in Phase 1

The UK's Competition and Markets Authority (CMA) has announced it will begin a Phase 1 investigation on the partnership between Alphabet Inc. and Anthropic PBC to determine whether the arrangement merits being treated as a merger subject to a Phase 2 investigation.

Lately, the CMA has looked into several partnerships between AI firms and tech giants, including the arrangement where Microsoft hired a swath of Inflection AI's team, including CEO Mustafa Suleyman, who now leads a new entity within the company, called Microsoft AI, which has a London hub. The CMA cleared this arrangement just in September, after deciding the arrangement does count as a merger, but one that does not give rise to a substantial lessening of competition.

Previously, following the CMA's invitation to comment on partnerships including the deal between Amazon and Anthropic, the regulator decided to launch a Phase 1 investigation into that partnership in August, only to close it in September after finding that although Amazon may be in a position of material influence concerning Anthropic, the latter's market presence is not significant enough to count as a 'relevant merger situation'.

Considering this, it may be that the passage from the 'invitation to comment' stage to a Phase 1 investigation is standard procedure. According to a guide to its process, the CMA only looks at whether there are plausible reasons to believe that the arrangement under investigation counts as a merger—this can be as obvious as Microsoft hiring a substantial part of Inflection but as subtle as Amazon potentially exerting material influence over Anthropic—and most importantly, whether the merger situation could give rise to a lessening of competition.

If during a Phase 1 investigation, the CMA finds grounds for believing that a merger situation has the potential to lessen competition, it launches a Phase 2 investigation. In this stage, it performs an in-depth assessment to find grounds to justify this concern. Thus, the investigation into Google and Anthropic could plausibly lead to a similar outcome as the one into Amazon and Anthropic.