By Mauro Orru


U.K. antitrust officials are weighing whether Microsoft's partnership with Inflection AI and the hiring of former employees pose a threat to competition, the latest probe into the tech giant's ties with artificial-intelligence startups amid heightened scrutiny on both sides of the Atlantic.

Microsoft earlier this year hired Inflection AI's co-founder and almost all of its employees and agreed to pay the startup around $650 million as part of a licensing fee to resell its technology. The Wall Street Journal reported last month that the Federal Trade Commission is investigating whether Microsoft structured the deal to avoid a government antitrust review of the transaction.

The U.K's Competition and Markets Authority is now launching a probe of its own to determine whether Microsoft's ties with Inflection AI should be considered a de facto merger that might stifle competition in the U.K. An initial decision is due by Sept. 11.

"We are confident that the hiring of talent promotes? competition and should? not be treated as a merger," a Microsoft spokesperson said. "?We will provide the U.K. Competition and Markets Authority with the information it needs to complete its enquiries expeditiously."

The U.K. investigation underscores the growing pressure on both sides of the Atlantic that tech giants face to justify their arrangements with AI startups. Microsoft is already under scrutiny in Britain, where officials are looking at whether its partnership with ChatGPT maker OpenAI should be considered a de facto merger.

Earlier this year, the Federal Trade Commission launched an inquiry into generative AI partnerships, ordering companies like Microsoft to provide information regarding recent investments into startups. The FTC is also seeking information about how and why Microsoft and Inflection AI negotiated their partnership, the Journal reported.

Closer scrutiny has already forced Microsoft to loosen the strings on some arrangements. Last week, the group relinquished its seat as an observer on OpenAI's board after Microsoft realized its position had unsettled some antitrust officials and opted to abandon it rather than defend a role it no longer needed, a person familiar with the decision said.

News Corp, owner of Dow Jones Newswires and The Wall Street Journal, has a content-licensing partnership with OpenAI.


Write to Mauro Orru at mauro.orru@wsj.com


(END) Dow Jones Newswires

07-16-24 0824ET