UK regulators probe Microsoft’s hiring of former Inflection staff

The UK’s Competition and Markets Authority (DMA) on Tuesday announced the start of an inquiry into Microsoft’s hiring of employees from Inflection for its consumer AI group, and its approximately $650 million payment to license the company’s technology.

Inflection cofounders Mustafa Suleyman and Karén Simonyan, along with a number of other colleagues, joined Microsoft in March; Suleyman became executive vice president and CEO of the newly-formed Microsoft AI, Simonyan joined as chief scientist for the group.

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At issue is whether Microsoft’s actions constituted what the CMA called “a relevant merger situation,” and if so, whether the moves will substantially lessen competition in the UK.

The inquiry begins July 17, with a decision on whether to proceed with further investigation to be announced Sept. 11.

“Regulators are right to challenge these practices, as they can potentially stifle innovation and competition,” said Phil Brunkard, executive counselor at Info-Tech Research Group, UK. “Start-ups thrive on the creativity and vision of their founders and the unique ideas they bring to the table.

“Competition is essential for fostering creativity and innovation, and we should encourage start-ups to grow independently, allowing competition to develop naturally,” he said. “This ensures that investment is based on merit, rather than allowing dominant players to define the rules of competition on their own terms.”

UK regulators aren’t the only ones to call the activities into question. In June, the US Federal Trade Commission (FTC) launched an investigation to determine whether there actually was an undisclosed acquisition through the hiring of key personnel and the licensing agreement.

The European Union is also closely monitoring developments. Reuters reported in April that EU antitrust chief Margrethe Vestager was watching to see whether other companies emulate Microsoft’s strategy of a talent and technology transfer in place of a formal merger. If it becomes a trend that circumvents the rules around mergers and competition, she told Reuters, she might act.