Microsoft gets an antitrust probe into its deal with Inflection AI

We all know Microsoft as a tech behemoth that’s not shy about buying out other companies to get ahead. However, this practice has landed it in legal trouble with several governmental bodies due to antitrust concerns. Microsoft had a deal with Inflection AI, and the FTC launched a probe into it to see if it dodged antitrust laws.

When a larger company wants to acquire the talent and resources from another company, it typically acquires it. However, it appears that Microsoft took another approach to getting Inflection AI’s talent. Back in March, Microsoft hired nearly every employee in the company. Along with that, the Redmond company also paid Inflection AI $650 million to acquire the license to its technology. It’s a classic multi-trillion-dollar corporation move.

The FTC launches a probe into the deal Microsoft made with Inflection AI

As you may know, the U.S. FTC keeps an eye on big businesses to make sure that they’re not making it harder for competition to flourish. As such, when a company spends more than $119 million to buy a company, it’s required to report it to the FTC.

The thing is that Microsoft didn’t acquire Inflection AI (technically). It just hired most of its employees and paid it $650 million to license its technology; it’s different… kinda. Let’s face facts, on its surface, it seems that Microsoft pulled this move to acquire the company’s talent and tech without actually buying it. We can guess that, if Microsoft bought Inflection AI, it would have been to the tune of $650 million, the same amount it paid to acquire the license.

Since it’s not an official acquisition, Microsoft didn’t technically need to report it to the FTC and deal with a possible block. If the FTC feels that a deal impacts competition in a market, it will sue to block the deal.

Buying a company without buying it

Now, The FTC is looking into this move that Microsoft pulled to see if the company did this to avoid a possible lawsuit. It launched a probe into this deal. If Microsoft assumes control over the company in the deal, then it could be found in violation of antitrust laws. Hiring the majority of a company’s employees and licensing its tech is essentially buying a company without buying it. The only difference is the ink on the contracts.

Microsoft claims that, while it hired all of its employees, Inflection AI still remains an independent company. It issued a statement to Engadget: “Our agreements with Inflection gave us the opportunity to recruit individuals at Inflection AI and build a team capable of accelerating Microsoft Copilot, while enabling Inflection to continue pursuing its independent business and ambition as an AI studio. We take our legal obligations to report transactions under the HSR Act seriously and are confident that we have complied with those obligations.”

So, we’re going to have to wait to see how this turns out. Not only is Microsoft a mega-corporation, but it already has OpenAI’s technology under its belt. How much is the company going to throw its weight around to push ahead in this AI race?