The UK’s Competition and Markets Authority (CMA) is launching preliminary investigations into whether the close collaborations and hiring practices between Microsoft, Amazon and a trio of AI startups fall within the scope of its merger rules – and whether the agreements could impact competition on the UK Market.
The announcement comes at a time when Big Tech’s approach to mergers and acquisitions in the AI world is under increasing scrutiny. Critics argue that so-called “quasi-mergers” have become fashionable as a means of circumventing regulatory oversight. Earlier this year, the Federal Trade Commission (FTC) launched its own investigation into Alphabet, Amazon and Microsoft’s various investments in emerging AI companies to determine whether “the partnerships pursued by dominant companies risk distorting innovation and… undermining fair competition.” ”
At the same time, governance around so-called “foundational models” (also “foundation” or “frontier” models) was also on the regulatory agenda in Europe and elsewhere. Foundation models are essentially the underlying infrastructure on which other AI systems can be built, and serve as large-scale models that can be used for a variety of tasks.
The CMA’s chief executive for mergers, Joel Bamford, said it was inviting comments from relevant parties as part of its evidence gathering as it assesses whether these various partnerships are comparable to mergers from a regulatory perspective and whether they impact competition in the UK could be a rapidly growing AI industry.
“Endowment models have the potential to fundamentally impact the way we all live and work, including products and services across so many UK sectors – healthcare, energy, transport, finance and more,” Bamford said in a statement. “That’s why open, fair and effective competition in endowment scheme markets is vital to ensure that people and businesses in the UK and across our wider economy, where technology plays a huge role in growth, reap the full benefits of this “Use transformation” and productivity.”
Competition
The UK has previously raised concerns about the nature of the counterfeiting Partnerships with “key players” in the foundation model space could help “established technology companies” (i.e. Big Tech) protect themselves from competition. While a straightforward takeover would undoubtedly attract regulatory scrutiny, partnerships, investments and acqui-hires could be a way to circumvent this oversight – or so the argument goes.
Microsoft’s investment in and close partnership with ChatGPT maker OpenAI caught the CMA’s attention late last year when the regulator issued a formal “invitation to comment” aimed at relevant AI and business stakeholders. The European Commission (EC) followed suit with a similar investigation in January.
However, a lot has happened since then. Microsoft hired the core team behind Inflection AI, a US-based OpenAI rival in which it had previously invested. Earlier this month, Microsoft launched a new London AI hub led by former Inflection and DeepMind scientist Jordan Hoffmann.
Elsewhere, Microsoft also recently invested in Mistral AI, a French AI startup (and double unicorn) working on fundamental models.
A Microsoft spokesman said it would provide the CMA with all the information it needs to quickly complete its investigation.
“We remain confident that common business practices such as hiring talent or making a partial investment in an AI startup promote competition and are not the same as a merger,” the spokesperson said.
Amazon again recently completed a $4 billion investment in Anthropic – another US-based AI company working on large language models.
An Amazon spokesman called the CMA’s move to explore such a collaboration “unprecedented,” especially when the partnership with Anthropic does not give it a seat on the company’s board or an observer role – unlike Microsoft, which eventually signed up for one such procured – voting “observer” role on OpenAI’s board last year. The spokesperson also noted that this does not limit Anthropic’s ability to run models across different clouds.
“By investing in Anthropic, which just launched its best-in-class new Claude 3 models, we are helping make the generative AI segment more competitive than it has been in recent years,” the spokesperson told TechCrunch in a statement published statement. “And customers are very excited about the opportunities this collaboration offers them. We are confident the facts speak for themselves and hope the CMA agrees to resolve the issue quickly.”
The CMA’s initial request for comment runs from today until May 9, a period known as “advance notification”. This can lead to a formal “Phase 1” review involving the target companies directly – in this case Microsoft and Amazon. The entire Phase 1 review period, if it occurs, must be completed within 40 days. A decision must then be made as to whether the partnerships are considered a “relevant merger”.