Microsoft's recruitment of key figures from AI startup Inflection will not be scrutinized by the European Commission. The decision comes after seven European Union member states, initially wary about the move's impact on competition in artificial intelligence, pulled back their concerns.
Initial Competition Fears
A group of EU countries expressed worries about Microsoft's hiring of Inflection's founders, Mustafa Suleyman and Karen Simonyan, as well as around 70 other staff. The primary concern was the potential impact on fair competition within the AI sector. However, due to the deal not meeting specific revenue criteria, the Commission opted not to proceed with an investigation.
Microsoft acquired a significant stake in Inflection AI, injecting $650 million into the company and recruiting its founders along with a significant portion of its staff. The strategic move of hiring Inflection's founders and a substantial portion of its workforce raised eyebrows, attracting scrutiny from antitrust regulators in both the United States and the United Kingdom.
Inflection later capped the usage of the free version of its Pi chatbot, pivoting to enterprise instead. While the company initially considered shutting down Pi due to limited resources, White announced that the chatbot will remain available to consumers, though with certain restrictions. The free version of Pi will have limitations designed to curb high-volume usage, though specific details are still under discussion.
Legal Framework
The Commission's decision follows a ruling from the EU's highest court, which restricts the regulator's ability to assess deals that don't reach certain financial thresholds. Despite recognizing that Microsoft's agreement with Inflection constitutes a market change under Article 3 of the EU Merger Regulation, they decided against further probing.
Reacting to the Commission's approach, Microsoft argued that bringing new talent on board should not be labeled as a merger. A company spokesperson asserted that hiring enhances, rather than limits, competition.
Meanwhile, the UK's Competition and Markets Authority (CMA) had already given the green light for the acquisition earlier in September. After assessing information from Microsoft, Inflection, and other industry participants, the CMA found the transaction did not threaten competitive balance.
