UK probes Amazon and Microsoft over AI partnerships with Mistral, Anthropic, and Inflection

The U.K.’s Competition and Markets Authority (CMA) is launching preliminary enquiries into whether the close-knit tie-ups and hiring practices involving Microsoft, Amazon and a trio of AI startups falls within the scope of its merger rules — and whether the arrangements could impact competition in the U.K. market.

The announcement comes amid growing scrutiny of Big Tech’s approach to M&A in the world of AI, where critics argue that the so-called “quasi-merger” has emerged as flavor of the day as a means of bypassing regulatory oversight.

At the same time, governance around so-called “foundational models” (or “foundation models”) has also been on the regulatory agenda in Europe and elsewhere. Foundation models are basically the underlying infrastructure on which other AI systems can be built, serving as large-scale models that can be used for a variety of tasks.

The CMA’s executive director of mergers, Joel Bamford, said that it’s merely inviting comments from relevant parties, as it assesses whether these various partnerships are tantamount to mergers, and whether it might impact competition in the U.K.’s fast-growing AI industry.

“Foundation models have the potential to fundamentally impact the way we all live and work, including products and services across so many U.K. sectors – healthcare, energy, transport, finance and more,” Bamford said in a statement. “So open, fair, and effective competition in foundation model markets is critical to making sure the full benefits of this transformation are realised by people and businesses in the UK, as well as our wider economy where technology has a huge role to play in growth and productivity.”

The UK has previously noted concerns around how the forging of partnerships involving “key players” in the foundation model space could help the “incumbent technology firms” (i.e. Big Tech) protect themselves from competition. While a straight forward acquisition would undoubtedly draw regulatory scrutiny, partnerships, investments, and “acqui-hires” could be a way of circumventing this — or so the argument goes.

Microsoft’s investment in, and close partnership with, ChatGPT-maker OpenAI attracted the CMA’s scrutiny late last year, with the regulator launching a formal “invitation to comment” aimed at relevant stakeholders in the AI and business spheres. The European Commission (EC) followed suit with a similar investigation in January.

A lot has happened since then though. Microsoft hired the core team behind Inflection AI, a U.S.-based OpenAI rival it had previously invested in, and earlier this month Microsoft launched a new London AI hub fronted 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 foundational models that could be construed as rivalling OpenAI.

And then there’s Amazon, which recently completed its $4 billion investment in Anthropic — another U.S.-based AI company working on large language models.

An Amazon spokesperson called the CMA’s move to review a collaboration of this type “unprecedented,” particularly when its partnership with Anthropic doesn’t give it a seat on the company’s board or even an observer’s role — unlike Microsoft, which did eventually procure a non-voting “observer” role on OpenAI’s board last year. The spokesperson also noted that it isn’t restricting Anthropic’s ability to run models across different clouds.

“By investing in Anthropic, which has just released its industry-best, new Claude 3 models, we’re helping make the generative AI segment more competitive than it’s been the last couple years,” the spokesperson said in a statement issued to TechCrunch. “And, customers are very excited about the opportunities this collaboration is providing them. We’re confident that the facts speak for themselves, and hope the CMA agrees to resolve this quickly.”

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