Microsoft’s recent investment in Mistral AI, a French AI startup will not subject the company to antitrust scrutiny in the United Kingdom
The country’s Competition and Markets Authority (CMA) determined on Friday that the partnership “does not qualify for investigation under the merger provisions of the Enterprise Act 2002.”
The decision is made in response to three early-stage investigations that the CMA disclosed three weeks ago regarding Amazon and Microsoft’s AI partnerships and investments, including Microsoft’s $16 million investment in Mistral AI, an OpenAI competitor working on large language models.
Microsoft subsequently recruited the team responsible for Inflection AI, an additional OpenAI competitor, effectively gutting the startup.
In another statement, the CMA also alluded to Amazon’s $4 billion investment in Anthropic, a U.S.-based AI company developing large language models.
Silicon Valley and the quasi-merger
Big Tech’s most recent strategy to evade regulatory supervision, “quasi-mergers,” in which they attempt to acquire control over new technologies without purchasing startups outright, has come under increasing scrutiny. This could be achieved through various means such as investing, securing board memberships, recruiting founding teams, etc.
The investigations into the investments made by Alphabet, Amazon, and Microsoft in emerging AI firms were initiated by the Federal Trade Commission (FTC) in early 2024. These investigations aimed to determine whether the “partnerships pursued by dominant companies risk distorting innovation and undermining fair competition.”
Efforts by the CMA are included in the same regulatory drive. Continued participation in two recently announced “invitations to comment” could result in formal, in-depth investigations. However, the CMA’s dismissal of the Mistral AI case is illuminating because it does not “qualify” for investigation under the current rules.
According to Alex Haffner, competition partner at the U.K. law firm Fladgate, this finding indicates that the partnership structure between Microsoft and Mistral AI does not confer adequate rights or influence on the larger company, particularly regarding M&A regulation. Ultimately, it amounted to a minority investment in a double unicorn that had recently completed a $415 million funding round.
Haffner stated, “By doing so, the decision validates Microsoft’s stated stance on the partnership.”
This “stated position” was that a modest investment is insufficient to acquire significant influence for the future of an emerging AI venture. Microsoft would own less than one percent of Mistral AI upon converting its investment to equity during the subsequent funding round of the French startup.
A Microsoft spokesperson stated at the time the CMA announced its initial investigation:
“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.”
Microsoft did not acquire “material influence over Mistral AI’s commercial policy,” as confirmed by the CMA, which previously maintained that Big Tech may have adopted new methods to shield itself from antitrust inquiries.
A CMA spokesperson stated, “The CMA has reviewed the information submitted by Microsoft and Mistral AI, as well as the responses to its invitation to comment.” “The CMA concludes, based on the evidence, that Microsoft has not obtained a substantial amount of influence over Mistral AI through the partnership; therefore, Microsoft is not subject to investigation.”
Pollination functions
The CMA issued a warning last month regarding the increasing sway of Big Tech companies over the advanced AI market, expressing concern over the concentration and interconnection of developers in the burgeoning generative AI sector.
However, the CMA has now stated that at least one of the deals it monitored does not warrant investigation, indicating that Big Tech’s efforts to contaminate the AI ecosystem globally may be partially successful.
However, two cases still need to be solved: the substantial investment made by Amazon in Anthropic and the employment of critical Inflection personnel by Microsoft. Could we anticipate a comparable result in that case?
Haffner stated, “The CMA has determined that the agreements between Microsoft and Mistral do not meet the relevant jurisdictional standard material influence’ over Mistral.” “Time will tell, but it is therefore assumed that the application of the test in this instance is clearer than in the case of the other AI partnerships the CMA is investigating.”
It is certainly not as straightforward. Amazon has allocated its most significant venture capital investment to Anthropic, which accounts for over 50% of the total $7.6 billion raised by the AI company in the three years since its inception. And although Inflection continues to operate from a technical standpoint, Microsoft acquired its founders and several key personnel, which was, in many ways, equivalent to an acquisition.
Additionally, we should recognize the CMA’s ongoing case concerning Microsoft’s close ties with OpenAI, which is distinct but related. In January, the European Commission (EC) issued a formal “invitation to comment” to pertinent stakeholders in the fields of artificial intelligence (AI) and business, which was initiated by the regulator last year.
Therefore, drawing too many conclusions about the remaining pending cases from the day’s news is not prudent.
Haffner remarked, “Intriguingly, the CMA has only confirmed the findings of the Mistral investigation; this leaves the position on the other two deals and the CMA’s ongoing investigation into Microsoft’s role in the Open AI project uncertain.”
“In conclusion, it is evident that competition authorities maintain a high level of vigilance regarding advancements in the AI industry. The CMA is anticipated to make several further declarations regarding the progress of their ongoing workstreams in this domain shortly.”
