Microsoft’s Hiring Of Inflection AI Staff Does Not Meet EU Merger Thresholds

Microsoft’s hiring of Inflection AI staff including its co-founders earlier this year, does not meet the necessary “merger” threshold to trigger an EU antitrust investigation.

The European Commission therefore announced on Wednesday that the mass hiring will not be scrutinised under European Union merger rules.

It comes after the UK competition regulator, the Competition and Markets Authority (CMA), had earlier this month cleared Microsoft’s hiring of former staff at Inflection AI.

AI consolidation

Microsoft’s practices drew its attention in March 2024 when the software giant hired Mustafa Suleyman as head of its newly-created AI unit.

Redmond also hired a most of the 70 employees from Inflection, which Suleyman had set up in 2022. Redmond also hired Inflection co-founder and Karen Simonyan.

It should be remembered that Mustafa Suleyman was a former employee of AI rival Google, and was one of the three three co-founders of DeepMind back in 2010.

Microsoft reportedly paid $650 million (£514m) to Inflection as part of the mass hiring deal, which effectively turned Inflection into a much smaller company with a less ambitious business model.

Then in April 2024 Microsoft announced that it was to open a London hub for its new consumer AI division headed by Jordan Hoffmann, who joined from Inflection AI in March.

No examination

Now the European Commission has said that seven EU countries had dropped their requests asking it to examine the deal.

The move followed a ruling from Europe’s top court earlier this month prohibiting the Commission from examining merger cases which fall below the EU’s merger revenue threshold, Reuters reported.

Judges reportedly said the EU antitrust watchdog was also not allowed to encourage its national peers to ask it to take up such cases.

“The European Commission takes note of the withdrawal of the initial referral requests by seven Member States to review under Article 22 of the EU Merger Regulation (‘EUMR’) the acquisition of certain assets of Inflection AI, Inc. (‘Inflection’) by Microsoft Corporation (‘Microsoft),” said the Commission.

“Therefore, the Commission will take no decision in this matter,” it said.

However, it noted the deal amounted to a merger as it means the ‘new Inflection’ would shift its focus to a different activity, namely its AI studio business.

Microsoft welcomed the announcement.

“We continue to be confident that the hiring of talent promotes competition and should  not be treated as a merger,” a Microsoft spokesperson told Reuters.