Microsoft has been a key player in the AI race Credit: CFOTO/Future Publishing / Getty Images

The UK’s competition regulator has launched a formal investigation into Microsoft’s partnership with Inflection AI. 

The UK Competition and Markets Authority (CMA) said it was looking into the tech giant’s hiring of Mustafa Suleyman, co-founder of Google DeepMind and Inflection AI, as well as the hiring of several Inflection employees. 

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Regulators have been applying pressure to Big Tech’s partnerships in the AI industry. 

Microsoft has been a key player in the AI race over the past two years and has made a number of deals with smaller start-ups.

Microsoft agreed to pay Inflection AI $650m to license its AI software, following the company hiring co-founders Mustafa Suleyman and Karén Simonyan, along with most of the start-up’s staff. 

The deal left Inflection AI with a much smaller workforce, looking to offload some of its computing power, according to a Bloomberg report, citing people familiar with the matter. 

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Inflection was previously valued at $4bn after raising around $1.3bn in 2023, following interest in its GenAI chatbot Pi. 

Pi was marketed as a kinder and more reliable rival to OpenAI’s popular ChatGPT. However, former co-founder Suleyman said that Inflection had failed to find an efficient business model for the chatbot. 

Last week, Microsoft announced it had given up its observer seat at OpenAI, amid growing scrutiny from regulators over how much control it has over the ChatGPT-maker. 

Holding the observer seat meant that the company could attend OpenAI’s board meetings and access confidential information about the company’s operations.

In a letter to OpenAI on Tuesday (9 July), Microsoft said the company had seen enough progress to be confident in its direction. 

“Over the past eight months we have witnessed significant progress from the newly formed board and are confident in the company’s direction. We no longer believe our limited role as an observer is necessary,” Microsoft wrote. 

Microsoft, which invested $13bn in OpenAI, has been under watch by EU regulators for its use of the ChatGPT maker’s technology. The bloc’s antitrust watchdog said it would survey OpenAI’s rivals.