Microsoft, Amazon AI Deals Scrutinized by CMA

(Bloomberg) -- Amazon.com Inc. and Microsoft’s investments into artificial intelligence startups will get deeper scrutiny from the UK’s antitrust watchdog, the latest example of how global regulators are grappling with how the world’s largest technology firms are influencing the booming market.

The Competition and Markets Authority said Wednesday it was gathering information from market players to determine whether the $4 billion collaboration between Amazon and AI firm Anthropic threatens competition in the UK.

It also said it was looking at Microsoft’s partnerships with Mistral and Inflection AI, a startup that lost its chief executive and most of its staff to Microsoft last month. The shares in Microsoft and Amazon were little changed in pre-market trading.

The swift action follows findings from the agency that the pattern of large tech firms investing in AI startups could allow them to shape the markets and cause competition concerns. The CMA said it had uncovered an “interconnected web” of partnerships and investments within AI.

“We remain confident that common business practices such as the hiring of talent or making a fractional investment in an AI start up promote competition and are not the same as a merger,” a Microsoft spokesperson said.

Related:Amazon Invests $2.75B in AI Startup Anthropic

Microsoft’s partnership with OpenAI Inc. is already in the midst of an initial investigation by the agency which announced it was looking into it in August. That tie-up is set to avoid European scrutiny with regulators not seeing the need for a formal investigation as its falls short of the definition of a takeover.

The US Federal Trade Commission is also at the initial stages of examining the nature of Microsoft’s investment in OpenAI and whether it may violate antitrust laws.

“It’s unprecedented for the CMA to review a collaboration of this type,” Amazon said in a statement. “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.”

In a blog post, the CMA said the AI partnerships could have “pro-competitive benefits” but the agency remained concerned about the possibility that large tech firms were using the alliances “to shield themselves from competition.” The CMA has also opened a separate exploration of the cloud-computing market.

Microsoft has made a flurry of AI alliances and deals in recent months. In February, the company unveiled a partnership with Mistral making the French startup’s models available to customers of Microsoft’s Azure cloud service. With it, Microsoft also made a €15 million investment into Mistral, a deal that immediately drew scrutiny from European regulators.

Related:Amazon Bets $150 Billion on Data Centers Required for AI Boom

Mistral said it would work closely with the CMA to “ensure that our long-term independence and access to the market are upheld.”

“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,” an Anthropic spokesperson said.

In March, Microsoft announced it had hired Mustafa Suleyman, the co-founder of Inflection AI, another OpenAI rival that Microsoft had backed. Suleyman joined as a vice president, bringing a bulk of his startup’s staff to Microsoft.

Inflection said it would drop its main service -- a personal assistant AI chatbot -- in favor of a service for business customers and license its technology to Microsoft. The company, which raised $1.5 billion, assured investors that they would be made whole.

Amazon has moved slower on adding generative AI capabilities compared to Microsoft and Alphabet Inc.’s Google. But the e-commerce giant has tried catching up through its cloud business, which leads the market.

With its most recent deal, a $2.75 billion injection into Anthropic in March, the startup agreed to rely on Amazon Web Services for some of its operations and use Amazon’s custom-made chips. Anthropic also has an investment from Google, whose cloud the startup uses as well.

Inflection didn’t immediately respond to a request for comment.