Microsoft’s hiring of employees from artificial intelligence startup Inflection has been referred for an initial merger investigation in the United Kingdom. The UK’s Competition and Markets Authority (CMA) stated on Tuesday that it will assess whether the recruitment of Mustafa Suleyman, Inflection’s co-founder, and a significant portion of the startup’s staff constitutes a merger, potentially reducing competition within the AI sector. The CMA will decide by September 11 whether to escalate the investigation to an in-depth inquiry, known as a “Phase 2” probe.

A Microsoft spokesperson expressed confidence that the company’s hiring practices promote competition and should not be considered a merger. The spokesperson added that Microsoft would provide the CMA with all necessary information to complete its inquiries. In March, Microsoft announced the hiring of several employees from Inflection, including Suleyman, who has been appointed as Microsoft’s executive vice president and CEO of Microsoft AI.

This new unit focuses on AI products such as Copilot, an AI assistant integrated into Windows and Microsoft 365. Alongside Suleyman, Karen Simonyan, another former Inflection staffer, joined Microsoft as its chief scientist.

CMA investigates Microsoft’s AI hiring

The CMA’s investigation also includes looking into Microsoft’s “entry into associated arrangements” with Inflection, which could imply resale of Inflection’s AI models via the Azure cloud platform. However, Microsoft only mentioned hiring several members of Inflection’s 70-person team, without disclosing further details of any partnership. This investigation follows the CMA’s previous decisions on similar deals.

Earlier this year, the regulator dropped an inquiry into Microsoft’s equity investment and partnership with the French AI startup Mistral. The CMA also invited feedback on Microsoft’s potential merger with another AI startup, Anthropic, though it has yet to announce a formal review of that arrangement. Microsoft has heavily invested in AI, pouring more than $13 billion into OpenAI and integrating OpenAI’s GPT models into its products, such as the Copilot AI platform and Bing search engine.

Similarly, Amazon has invested $4 billion into Anthropic and offers the company’s AI models through its managed AI service, Amazon Bedrock. The CMA’s decision could have significant implications for the AI sector, as it seeks to maintain competitive markets amidst rapid advancements in AI technology.