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Report: Antitrust investigation into Microsoft’s deal with Inflection AI

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The Federal Trade Commission (FTC) is currently investigating Microsoft’s recent deal with AI startup Inflection AI to determine whether the tech giant deliberately structured it to avoid antitrust scrutiny, the Wall Street Journal reported on Thursday. It is the latest in a series of regulatory efforts to scrutinize the dominance of big tech companies in the AI ​​space.

Key data

In March, Mustafa Suleyman, co-founder and CEO of Inflection AI, moved to Microsoft along with almost all of the startup’s 70 employees, a move that rocked the company, which was valued at $4 billion last year.

The new hires were part of a deal in which Microsoft agreed to pay $650 million to Inflection AI, allowing the Windows maker to license the startup’s AI models.

However, as part of the agreement, Microsoft did not acquire any shares in Inflection AI or the startup’s intellectual property, meaning it was no longer necessary to report the company to antitrust authorities.

Citing an anonymous source familiar with the matter, the Journal reported that the FTC has demanded details about “how and why” the deal was negotiated and has sent subpoenas to both Microsoft and Inflection demanding that they produce documents up to two years old.

The regulator is currently investigating whether Microsoft engineered the deal so that it could take control of Inflection AI without being subject to FTC scrutiny, the report said.

Forbes has reached out to both Microsoft and Inflection AI for comment.

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What you should pay attention to

If the review finds that Microsoft needs to seek review of the deal, the FTC could ask a court to fine Microsoft and block the deal until a full review of its competitive impact is completed.

Important background

Late Wednesday, The New York Times reported that federal regulators have agreed to launch separate antitrust investigations into AI-related issues against Microsoft, OpenAI and Nvidia. The report says the Justice Department will investigate chipmaking giant Nvidia to determine whether the company’s actions violated antitrust laws. Although the details of the investigation were not mentioned in the report, the oversight of Nvidia comes amid concerns within the tech industry about the chipmaker’s near-total dominance over rivals in the AI ​​chip business. The report says the FTC will lead the investigations into Microsoft and ChatGPT maker OpenAI, in which Microsoft is a major investor.

Main critics

In March, after Suleyman’s move to Microsoft, Nathan Benaich, founder and general partner of Air Street Capital, told Forbes: “While no one predicted this specific outcome, we shouldn’t be surprised. If antitrust regulators make (mergers and acquisitions) prohibitively difficult, we should expect these bizarre half-exits to become more common.”

Further information

FTC launches antitrust investigation into Microsoft’s AI deal (Wall Street Journal)

US clears way for antitrust investigations against Nvidia, Microsoft and OpenAI (New York Times)

AI Unicorn Inflection abandons its ChatGPT challenger as CEO Mustafa Suleyman moves to Microsoft (Forbes)

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