TOPLINE
The Federal Trade Commission is probing Microsoft’s recent deal with artificial intelligence startup Inflection AI to examine if the tech giant deliberately structured it in a manner that would avoid an antitrust review, the Wall Street Journal reported Thursday, the latest in a series of regulatory efforts to scrutinize big tech’s dominance over AI.
KEY FACTS
In March, Inflection AI’s co-founder and CEO Mustafa Suleyman joined Microsoft, along with nearly all 70 of the startup’s employees, in a move that shook up the company that was valued last year at $4 billion.
The hirings were part of a deal in which Microsoft agreed to pay Inflection AI $650 million, allowing the Windows maker to license the startup’s AI models.
Under the deal, however, Microsoft did not gain any equity in Inflection AI or acquire any of the startup’s intellectual property—eliminating the need for it to be reported to federal regulators for antitrust oversight.
Citing an unnamed source familiar with the matter, the Journal reported the FTC has sought details about “how and why” the deal was negotiated and has sent subpoenas to both Microsoft and Inflection seeking documents up to two years old.
The regulator is investigating whether Microsoft engineered the deal in a manner that allowed it to take control of Inflection AI without having to deal with an FTC review, the report adds.
Forbes has reached out both to Microsoft and Inflection AI for comment.
WHAT TO WATCH FOR
If the review finds Microsoft needed to seek a review of the deal, the FTC could ask a court to issue a fine against Microsoft and block the deal until a full review of its impact on competition is completed.
KEY BACKGROUND
Late Wednesday, the New York Times reported federal regulators agreed to undertake separate AI-related antitrust inquiries into Microsoft, OpenAI and Nvidia. The report said the Justice Department is set to investigate chipmaking giant Nvidia to see if the company’s actions violated antitrust laws. Although the specifics of the investigation were not mentioned in the report, oversight into Nvidia comes amid concerns within the tech industry about the chipmaker’s near complete dominance over rivals in the AI chip business. The report said the FTC will take a lead on inquiries into Microsoft and ChatGPT-maker OpenAI—in which Microsoft is a key investor.
CHIEF CRITIC
In March, after Suleyman’s move to Microsoft, Nathan Benaich, founder and general partner at Air Street Capital told Forbes: “While no one predicted this specific outcome, we shouldn’t be surprised. If antitrust regulators make [mergers and acquisitions] prohibitively difficult, we should expect these bizarre semi-exits to become more common.”
FURTHER READING
FTC Opens Antitrust Probe of Microsoft AI Deal (Wall Street Journal)