Dutch watchdog wants more powers after EU drops Microsoft Inflection probe

Concerns over the elimination of a future competitor through acquihiring

The Netherlands Authority for Consumers and Markets (ACM) has declared it needs fresh powers after the European Commission elected not to investigate Microsoft's acquihire of AI startup Inflection.

The UK's regulator, the Competition and Markets Authority (CMA), itself decided the deal was too small to bother with earlier this month. And yesterday the Commission said it would not open an investigation into the affair after member states withdrew their referral requests in light of the European Court of Justice's judgment in the Illumina/GRAIL case.

Illumina prevailed in Europe's top court earlier in September over its $7.1 billion acquisition of diagnostic test maker GRAIL. The win meant an end to the Commission accepting referrals for acquisitions that did not meet revenue thresholds but could eventually result in market distortions.

Such as, for example, a tech giant picking up a startup that hasn't much revenue right now, but could present competition in the future.

Martijn Snoep, ACM board chairman, said: "It remains to be seen whether Microsoft's stronger position after acquiring Inflection has any negative consequences for consumers and businesses in the Netherlands, such as fewer options or reduced innovation. That is why we believed that an investigation was necessary.

"The ability to assess the effects of these types of acquisitions and to prevent market power does not exist at this moment. In order to be able to do so, ACM requires a new power. It would also restore the ability of ACM to refer these types of acquisitions that have effects across Europe to the European Commission."

Microsoft did not wish to comment on the ACM's announcement.

Earlier this year, the software giant announced the formation of a new AI division headed by Mustafa Suleyman and Karén Simonyan, two of the three founders of Inflection. Both had previously worked at DeepMind, which was acquired by Google in 2014. According to reports, most of the AI startup's 70 employees came along as part of the deal.

The move, which could be seen as acquisition by hiring, triggered interest from regulators already considering Microsoft's investment in OpenAI and the company's stake in Mistral.

The ACM withdrew its referral request over Microsoft's move since it does not yet have the power to assess acquisitions that fall below the notification thresholds – in this instance, the relatively low turnover of Inflection. ®