UK competition regulator says Microsoft's stake in Mistral is not a merger

Britain's competition watchdog does not think Microsoft's investment in Mistral AI constitutes a merger situation - just weeks after calling for industry views on the agreement.

In a brief statement, the Competition and Markets Authority said today it "decided that Microsoft Corporation's partnership with Mistral AI does not qualify for investigation under the merger provisions of the Enterprise Act 2002."

Only in late April, the regulator confirmed it was evaluating whether the $16.4 million stake that Microsoft bought in the French AI startup effectively equated to a formal merger, and if so, it asked if this would "result in a substantial lessening of competition."

At the time and to assist with its assessment, the CMA invited "comment from interested parties." Also under the spotlight was Microsoft's decision to hire Inflection AI CEO and co-founder Mustafa Suleyman, who is now heading up Microsoft's AI division and took many of his employees with him.

In return, Microsoft is believed to have paid Inflection AI some $650 million. The CMA did not comment on this situation today, however, the European Commission said in mid-April it had determined the maneuvering did not technically add up to a merger.

Also still under the glare of the UK competition watchdog is the billions of dollars that Amazon has sunk into Anthropic. The agreement includes the startup buying resources for the AWS cloud and some exclusive arrangement to host Anthropic's models on Amazon's Bedrock platform for building GenAI apps.

Alex Haffner, competition partner at UK law firm Fladgate, said of the CMA's Mistral AI decision: "The CMA originally announced its investigation into the deal in parallel with separate, but clearly related, investigations into Microsoft's arrangements with Inflection AI and Amazon's with Anthropic. This demonstrated the CMA's determination to review closely the patchwork of arrangements emerging in the AI industry between large scale tech companies and smaller independent AI players.

"That the CMA has only confirmed the conclusions of the Mistral investigation is interesting as it leaves open the position on the other two deals, as well as the CMA's ongoing investigation into Microsoft's role in the Open AI project. Overall therefore, it is clear that the competition authorities are continuing to engage very closely with developments in the AI sector and we can expect several more announcements by the CMA in the near future as to the outcome of their ongoing workstreams in this space." ®