Microsoft’s acquisition of Inflection staff investigated by US regulators

Microsoft struck a deal with Inflection AI in March.
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  • The Wall Street Journal reported that the Federal Trade Commission is investigating Microsoft’s deal with Inflection AI.
  • The investigation is examining whether the deal was designed to evade regulatory scrutiny and control.
  • The Department of Justice is also examining these “takeover” deals in the technology industry.

The US’s top competition watchdog is investigating whether Microsoft’s deal to hire a majority of Inflection AI workers and pay the company $650 million to license its technology was struck as a way to dodge scrutiny.

according to The Wall Street JournalCiting a person familiar with the matter and records it has reviewed, the FTC requested documents from the companies dating back two years to understand whether the deal was formed to give Microsoft control of Inflection and fly under regulators’ radar.

Inflection co-founder Mustafa Suleiman joined Microsoft to lead its AI efforts in March, and most of Inflection’s 70 employees followed suit. Inflection’s new leadership team said last month that the company only has 12 people working there.

The Department of Justice also looks into deals like these, which are referred to as “acquisitions.” Ministry of Justice Apresident ntitrust Jonathan Kanter said: Financial Times Which “Acquirers are something that antitrust regulators will look at.”

He continued: “We do not use the stylistic or formal characteristics of how these companies operate [explain these deals]. What we look at are market realities.

He said, “We are focusing on the facts. If the form is different and the content is the same, we will not hesitate to take action.”

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If the FTC finds that Microsoft should have reported the deal to regulators, the watchdog could ask the court to fine Microsoft or temporarily halt the deal while the FTC conducts a comprehensive investigation and evaluates how it would impact competition, according to the Wall Street Journal.

Microsoft President Brad Smith told the Financial Times that it did not buy Inflection because “we didn’t want to own the company.” Microsoft instead “wanted to hire some of the people who had worked at the company,” he said.

Kanter also said there needs to be urgent scrutiny of Big Tech’s control over AI.

When the Microsoft and Inflection deal was announced, onlookers wondered whether the deal created a new blueprint for big tech companies to avoid the scrutiny of antitrust regulators.

Gavin Baker, managing partner of the investment firm Atreides administration, Ali X said: “If the Microsoft/Inflection deal stands, this is the roadmap for every big tech company to make acquisitions.”

Microsoft, Inflection AI and the FTC did not immediately respond to requests for comment from Business Insider, which were submitted outside regular business hours.

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