Microsoft and Amazon's AI ambitions spark regulatory rumble

Tech giants confident everything's in order

UK regulators want to hear from "interested third parties" on whether Microsoft and Amazon's investments in AI startups is impeding competition.

The Competition and Markets Authority (CMA) has issued a call for views concerning the two megacorps' various deals and strategic decisions amid the ongoing lurch for AI leadership.

Sam Altman, CEO of OpenAI, and Microsoft CEO Satya Nadella

Microsoft's relationship with OpenAI now in competition regulator's sights


Under the microsocope is the "partnership" between Amazon and Anthropic, and Microsoft's agreement with Mistral AI, as well as its "hiring of former employees and related arrangements with Inflection AI," the CMA said.

The watchdog's intent is to ascertain if these market moves "fall within UK merger rules and the impact that these arrangements could have on competition in the UK."

As Reg readers know, Microsoft bought a $16.4 million stake in the French start-up in March (also of interest to the EC's antitrust team), and in the same month hired Inflection's CEO and co-founder, Mustafa Suleyman, who now heads up Microsoft's AI division, partly staffed by slew of other employees he took with him.

Microsoft reportedly paid $650 million to Inflection AI, triggering yet more interest from competition regulators in the EC. Bloomberg last week suggested the EC ruled it was not technically a merger but Reuters said officials are still mulling a wider antitrust case.

A spokesperson for Microsoft told The Register: "We remain confident that common business practices such as the hiring of talent or making a fractional investment in an AI startup promote competition and are not the same as a merger," they said. 

"We will provide the UK Competition and Markets Authority with the information it needs to complete its inquiries expeditiously."

Like Microsoft and Google, Amazon is being probed by the US Federal Trade Commission (FTC) over its own AI dealings. However, the CMA's potential inspection of Amazon's investment will be the first of its kind in Europe.

Bezos's company completed its $4 billion investment in Anthropic last month ago after injecting an initial $1.25 billion in September 2023.

Amazon's agreement with the AI upstart includes Anthropic purchasing resources on its cloud platform, AWS, and there will be some non-exclusive arrangements to host Anthropic's models on Amazon Bedrock – its platform for building GenAI apps.

Like Microsoft, Amazon thinks it's in the clear, and hopes for a speedy resolution. A spokesperson said: "It's unprecedented for the CMA to review a collaboration of this type.

"Unlike partnerships between other AI startups and large technology companies, our collaboration with Anthropic includes a limited investment, doesn't give Amazon a board director or observer role, and continues to have Anthropic running its models on multiple cloud providers.

"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. 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."

An Anthropic spokesperson echoed Amazon's sentiment: "We intend to cooperate with the CMA and provide them with the complete picture about Amazon's investment and our commercial collaboration.

"We are an independent company and none of our strategic partnerships or investor relationships diminish the independence of our corporate governance or our freedom to partner with others. Anthropic's independence is a core attribute – integral both to our public benefit mission and to serving our customers wherever and however they prefer to access Claude."

The CMA's call for views runs until May 9, after which a Phase 1 review will take place, and must be completed within 40 working days. That may decide the partnerships don't constitute a merger situation, or do, but don't present any threat to competition.

It may also conclude a partnership can be considered a merger that threatens market competitiveness, a decision that would lead to a more lengthy investigation that could take up to 32 weeks.

Joel Bamford, executive director of mergers at the CMA, said: "Foundation 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. So open, fair, and effective competition in Foundation Model markets is critical to making sure the full benefits of this transformation are realized 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.

"Given the global nature of these markets, competition authorities around the world are actively looking into AI.

"The CMA recently committed to step up the use of its merger control powers as part of its recent Foundation Models update. While we remain open-minded and haven't drawn any conclusions, our aim is to better understand the complex partnerships and arrangements at play."

Mistral AI and Inflection AI didn't immediately respond to our request for a response to the CMA's announcement. ®

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