Microsoft is reportedly under investigation by the Federal Trade Commission over its contract with Inflection AI The Wall Street Journal. Back in March, the company laid off nearly all of Inflection AI’s employees, including founders Karen Simonyan and Mustafa Suleyman, who also co-founded DeepMind. In addition, Microsoft paid Inflection AI $650 million to license its artificial intelligence technology. Now the FTC wants to know whether the companies deliberately structured the deal to avoid being subject to regulatory antitrust scrutiny.
whom Journal notes that companies are required to report any acquisitions worth $119 million or more to federal antitrust agencies. The FTC or the Justice Department can then investigate whether the deal stifles competition in the industry and then sue to block the merger or investment it deems anticompetitive. When companies want to hire all the talent at another firm, they usually buy the other through a “buyout.” But Microsoft did not buy Inflection, denying that the larger company had any power over it. New COO Ted Shelton told the publication that it still operates as an independent company under new management.
The FTC has already served subpoenas to both Microsoft and Inflection over the past two years, requesting relevant documents. If the companies find that they entered into an agreement that gave Microsoft control over another while avoiding regulatory scrutiny, then Microsoft could be fined and the transaction suspended pending a deeper investigation.
Microsoft provided the following statement to Engadget: “Our agreements with Inflection allowed us to hire individuals at Inflection AI and build a team capable of accelerating Microsoft Copilot, while allowing Inflection to pursue its independent business and ambitions as an AI studio . We take our legal obligations to report transactions under the HSR Act seriously and are committed to complying with them.”
US federal agencies have cracked down on the monopolistic practices of the world’s biggest technology companies over the past few years. To be more efficient in conducting antitrust investigations involving today’s biggest players in AI, the agencies also concluded a contract about how they share their responsibilities. The Department of Justice will lead investigations into NVIDIA, while the FTC will be responsible for antitrust investigations involving Microsoft and OpenAI.
Update, June 6, 2024, 11:46 a.m. ET: This story has been updated to include a statement from Microsoft.
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