**Big Tech’s “Quasi-Mergers” Under Scrutiny**
In recent years, Big Tech companies like Alphabet, Amazon, and Microsoft have been utilizing a new tactic to gain control over emerging technologies without acquiring startups outright. These so-called “quasi-mergers” involve making investments, securing seats on boards, or hiring founding teams to exert influence over new technologies. However, regulatory bodies are increasingly scrutinizing these tactics, questioning whether they distort innovation and undermine fair competition.
**CMA’s Investigation into AI Investments**
The U.K.’s Competition and Markets Authority (CMA) has joined the regulatory push by launching investigations into the AI investments and partnerships of major tech companies. Three weeks ago, the CMA announced probes into Amazon and Microsoft’s AI investments, including Microsoft’s $16 million investment in Mistral AI, a French AI startup working on large language models. Microsoft’s subsequent hiring of the team behind Inflection AI, another OpenAI rival, further raised eyebrows.
**CMA Clears Microsoft’s Investment in Mistral AI**
However, the CMA recently concluded that Microsoft’s investment in Mistral AI does not qualify for investigation under existing merger provisions. This decision suggests that the structure of the partnership between Microsoft and Mistral AI does not grant Microsoft sufficient rights or influence to warrant antitrust scrutiny. It was a minority investment in a startup that had already closed a significant funding round.
**Microsoft’s Stated Position on Quasi-Mergers**
Microsoft has consistently maintained that making small investments or hiring talent from AI startups does not constitute a merger or give them significant control over the startup’s direction. They argue that these are common business practices that promote competition. A Microsoft spokesperson stated, “We remain confident that… fractional investment in an AI startup promote[s] competition and are not the same as a merger.”
**CMA’s Assessment and Pollination of the AI Ecosystem**
The CMA’s decision not to investigate Microsoft’s partnership with Mistral AI highlights the effectiveness of Big Tech’s tactics to pollinate the AI ecosystem. The CMA expressed concerns about the concentration of power in the generative AI market but has now acknowledged that at least one of the cases they were examining does not require investigation. This raises questions about whether Big Tech’s efforts to spread influence throughout the AI market are working.
**Remaining Cases and Ongoing Investigations**
However, the CMA still has two outstanding cases to consider: Amazon’s $4 billion investment in Anthropic, a U.S.-based AI company, and Microsoft’s hiring of key Inflection personnel. These cases may have different outcomes, and it is premature to draw conclusions based on the CMA’s decision regarding Mistral AI. Additionally, the CMA and the European Commission are continuing their investigations into Microsoft’s close ties with OpenAI.
**Conclusion**
The CMA’s decision not to investigate Microsoft’s investment in Mistral AI suggests that the partnership does not grant Microsoft enough influence to trigger antitrust scrutiny. However, the CMA’s ongoing investigations into other AI partnerships and investments indicate that regulatory bodies are closely monitoring developments in the AI sector. As competition authorities engage more with the AI industry, more announcements are expected in the near future regarding the outcomes of their ongoing workstreams.