Microsoft has been cleared of antitrust scrutiny in the UK over its recent investment in French AI startup, Mistral AI. On Friday, the Competition and Markets Authority (CMA) concluded that the partnership “does not qualify for investigation under the merger provisions of the Enterprise Act 2002.”
The decision follows three weeks after the CMA revealed early-stage probes into Amazon and Microsoft’s various AI investments and partnerships, including Microsoft’s $16 million investment in Mistral AI. Mistral AI is an OpenAI rival focused on developing large language models. Microsoft’s recent moves also included hiring the team behind Inflection AI, another OpenAI competitor, significantly impacting the startup.
Simultaneously, the CMA is investigating Amazon’s $4 billion investment in Anthropic, a U.S.-based AI company also working on large language models.
The spotlight on Big Tech’s new tactics to bypass regulatory oversight has intensified. Companies are pursuing “quasi-mergers” to control emerging technologies without outright acquisitions. This includes investments, board seats, and hiring founding teams.
Early in 2024, the Federal Trade Commission (FTC) launched investigations into Alphabet, Amazon, and Microsoft’s investments in AI firms to determine if these partnerships distort innovation and undermine fair competition.
The CMA’s actions are part of this regulatory push. While two of its recently announced probes are ongoing and may lead to formal investigations, the dismissal of the Mistral AI case indicates it doesn’t meet the criteria for investigation under current rules.
Alex Haffner, a competition partner at U.K. law firm Fladgate, suggests that the structure of Microsoft’s partnership with Mistral AI doesn’t grant sufficient rights or influence as per M&A regulation. Ultimately, Microsoft’s minority investment in the double-unicorn, which recently closed a $415 million round, supports its stated position that such small investments don’t offer significant control over AI startups.
“In so doing, the decision vindicates Microsoft’s stated position on the tie-up,” Haffner said.
Microsoft’s investment, converting to equity at Mistral AI’s next funding round, would result in an ownership of less than 1% of the company. A Microsoft spokesperson reiterated their stance during the CMA’s initial probe:
“We 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.”
While the CMA acknowledges the possibility of Big Tech adopting new methods to evade antitrust scrutiny, it confirmed that Microsoft hasn’t acquired any “material influence on Mistral AI’s commercial policy.”
“The CMA has considered information submitted by Microsoft and Mistral AI, together with feedback received in response to its invitation to comment,” a CMA spokesperson said. “Based 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.”
Last month, the CMA expressed concerns over Big Tech’s growing influence on the advanced AI market, highlighting the concentration of developers in the generative AI space. However, the CMA’s decision to dismiss the Mistral AI case suggests that Big Tech’s strategy to diversify their AI investments might be working to some extent.
Despite the decision on Mistral AI, two significant cases remain: Amazon’s $4 billion investment in Anthropic and Microsoft’s acquisition of key Inflection AI personnel. The CMA’s ongoing investigations could lead to different outcomes.
“The CMA has concluded that the arrangements between Microsoft and Mistral are not sufficient to give Microsoft ‘material influence’ over Mistral, which is the relevant jurisdictional test,” Haffner said. “Time 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.”
Amazon’s investment in Anthropic, its largest venture investment to date, represents over half of the $7.6 billion raised by the AI company. Microsoft’s hiring of Inflection AI’s founders and key team members also raises questions about quasi-mergers’ impact.
Additionally, the CMA’s investigation into Microsoft’s relationship with OpenAI continues. Launched last year, this “invitation to comment” targets stakeholders in the AI and business spheres. The European Commission (EC) initiated a similar inquiry in January.
- Microsoft’s investment in Mistral AI does not qualify for investigation under the Enterprise Act 2002.
- CMA’s scrutiny extends to Amazon’s $4 billion investment in Anthropic.
- Big Tech’s quasi-merger strategies face increasing regulatory attention.
- FTC and CMA investigate Alphabet, Amazon, and Microsoft’s AI partnerships for fair competition concerns.
Big Tech Investments in AI
| Company | Investment | Target AI Company | Amount ($) | Focus Area |
|---|---|---|---|---|
| Microsoft | Minority investment | Mistral AI | 16 million | Large language models |
| Microsoft | Hiring of AI team | Inflection AI | N/A | AI talent acquisition |
| Amazon | Major investment | Anthropic | 4 billion | Large language models |
The CMA’s decision on Mistral AI highlights the complexity of regulating Big Tech’s AI investments. While the Mistral AI case doesn’t qualify for investigation, the broader scrutiny of quasi-mergers and Big Tech’s influence on AI innovation continues. As regulatory bodies like the CMA and FTC delve deeper, the outcomes of these probes will shape the future landscape of AI development and competition.
This decision underscores the evolving nature of regulatory frameworks in the face of rapidly advancing technologies and the innovative strategies employed by dominant tech companies to maintain their competitive edge.
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