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Microsoft won\u2019t be facing antitrust scrutiny in the U.K. over its recent investment in French AI startup, Mistral AI<\/a>, with the country\u2019s Competition and Markets Authority (CMA) on Friday concluding<\/a> that the partnership \u201cdoes not qualify for investigation under the merger provisions of the Enterprise Act 2002.\u201d<\/p>\n The decision comes three weeks after the CMA revealed<\/a> a trio of early-stage probes into Amazon and Microsoft\u2019s various AI investments and partnerships, including the Redmond-based company\u2019s $16 million investment in Mistral AI<\/a>, an OpenAI rival working on large language models. Shortly after, Microsoft hired the\u00a0team behind Inflection AI<\/a>, another OpenAI rival, essentially gutting the startup.<\/p>\n Elsewhere, the CMA said it was also poking at Amazon\u2019s $4 billion investment<\/a> in Anthropic, a U.S.-based AI company working on large language models.<\/p>\n There has been growing scrutiny of Big Tech\u2019s latest tactic to dodge regulatory oversight by pursuing \u201cquasi-mergers<\/a>,\u201d through which they seek to secure control over new technologies without buying startups outright. This might be through making investments, procuring seats on boards, hiring founding teams and so on.<\/p>\n Early in 2024, the Federal Trade Commission (FTC)\u00a0launched investigations<\/a>\u00a0into Alphabet, Amazon and Microsoft\u2019s investments in emerging AI firms to establish whether the \u201cpartnerships pursued by dominant companies risk distorting innovation and undermining fair competition.\u201d<\/p>\n The CMA\u2019s efforts are part of that same regulatory push. Two of its recently announced \u201cinvitations to comment\u201d are still ongoing, and may lead to formal in-depth probes. Still, it\u2019s telling that the CMA is throwing out the Mistral AI case on the grounds that it doesn\u2019t \u201cqualify\u201d for investigation under existing rules.<\/p>\n Alex Haffner, competition partner at U.K. law firm Fladgate, says this finding suggests that the structure of Microsoft\u2019s partnership with Mistral AI doesn\u2019t grant the bigger company sufficient rights or influence, at least as it relates to M&A regulation. Ultimately, it was a minority investment into a double-unicorn that had closed a $415 million round just a few months earlier<\/a>.<\/p>\n \u201cIn so doing, the decision vindicates Microsoft\u2019s stated position on the tie-up,\u201d Haffner said. <\/p>\n This \u201cstated position\u201d was that making a small investment isn\u2019t enough to procure meaningful clout in the future direction of an up-and-coming AI startup. Microsoft would effectively own less than 1% of Mistral AI when its investment converts to equity at the French startup\u2019s next funding round. <\/p>\n A Microsoft spokesperson said at the time of the CMA\u2019s initial probe announcement:<\/p>\n \u201cWe remain confident that common business practices such as the hiring of talent or making a fractional investment in an AI startup promote competition and are not the same as a merger.\u201d<\/p>\n Microsoft spokesperson, April 2024<\/cite><\/p><\/blockquote>\n While the CMA maintains that Big Tech could be adopting new methods to protect themselves from antitrust scrutiny, it has now confirmed that Microsoft hadn\u2019t acquired any \u201cmaterial influence on Mistral AI\u2019s commercial policy.\u201d<\/p>\n \u201cThe CMA has considered information submitted by Microsoft and Mistral AI, together with feedback received in response to its invitation to comment,\u201d a CMA spokesperson said. \u201cBased on the evidence, the CMA does not believe that Microsoft has acquired material influence over Mistral AI as a result of the partnership and therefore does not qualify for investigation.\u201d<\/p>\n Just last month, the CMA sounded an alarm<\/a> over Big Tech\u2019s waxing influence on the advanced AI market, expressing concerns over the growing connection and concentration between developers in the snowballing generative AI space. But the CMA has now said that at least one of the deals on its radar doesn\u2019t qualify for investigation, suggesting that Big Tech\u2019s tactics to pollinate the AI ecosystem far and wide might be working to a degree.<\/p>\n But that still leaves two more outstanding cases: Amazon\u2019s gargantuan investment in Anthropic, and Microsoft\u2019s hiring of key Inflection personnel. Could we expect a similar outcome there?<\/p>\n \u201cThe CMA has concluded that the arrangements between Microsoft and Mistral are not sufficient to give Microsoft \u2018material influence\u2019 over Mistral, which is the relevant jurisdictional test,\u201d Haffner said. \u201cTime will tell, but the assumption is therefore that the application of the test is more clear-cut here than with the other AI partnerships under investigation by the CMA.\u201d<\/p>\n It\u2019s certainly not as cut-and-dry. Anthropic got Amazon\u2019s biggest venture investment to date, constituting more than half of the $7.6 billion the AI company has raised since its inception three years ago. And while Inflection technically still exists, Microsoft scooped up its founders<\/a> and various key colleagues<\/a> \u2014 in many ways, that was as good as an acquisition.<\/p>\n And let\u2019s not forget about the CMA\u2019s other separate, but related, ongoing case looking at Microsoft\u2019s close ties with<\/a> OpenAI. The regulator launched<\/a> a formal \u201cinvitation to comment\u201d aimed at relevant stakeholders in the AI and business spheres last year, and the European Commission (EC)\u00a0followed suit in January<\/a>.<\/p>\n So we probably shouldn\u2019t make too many conclusions about the other pending cases based on today\u2019s news. <\/p>\n \u201cThat the CMA has only confirmed the conclusions of the Mistral investigation is interesting, as it leaves open the position on the other two deals, as well as the CMA\u2019s ongoing investigation into Microsoft\u2019s role in the OpenAI project,\u201d Haffner said. \u201cOverall, therefore, it is clear that the competition authorities are continuing to engage very closely with developments in the AI sector, and we can expect several more announcements by the CMA in the near future as to the outcome of their ongoing workstreams in this space.\u201d<\/p>\n We\u2019re launching an AI newsletter! Sign up\u00a0<\/em>here<\/a><\/em>\u00a0to start receiving it in your inboxes on June 5.<\/em><\/p>\n<\/div>\nBig Tech and the quasi-merger<\/h2>\n
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Pollination works<\/h2>\n