The FTC has reportedly started an antitrust probe of Microsoft's deal with Inflection AI [Update]

Update - June 8 - We have received a statement on this story from a Microsoft spokesperson:

Our agreements with Inflection gave us the opportunity to recruit individuals at Inflection AI and build a team capable of accelerating Microsoft Copilot, while enabling Inflection to continue pursuing its independent business and ambition as an AI studio. We take our legal obligations to report transactions under the HSR Act seriously and are confident that we have complied with those obligations.

Original story - Back in March, Microsoft announced that it was launching a new division devoted completely to its AI services. As part of that launch, it hired Mustafa Suleyman, the co-founder of the startup Inflection AI, to be the first CEO of Microsoft AI. It also hired nearly all of the other team members of Inflection AI and paid the company about $650 million so Microsoft could license its technology.

Now that deal is reportedly under scrutiny by the US Federal Trade Commission. The Wall Street Journal reports, via unnamed sources, that the regulatory agency has begun a probe to see if Microsoft's partnership with Inflection AI violated US antitrust laws.

The story says that the FTC has sent subpoenas to Microsoft and Inflection AI for documents for the last two years. The agency reportedly wants to get information on how and why this partnership between the two companies came about.

The goal of this reported probe is to find out if Microsoft created a deal that would give it control over Inflection AI but still keep the FTC from launching a more formal investigation into the partnership. While Microsoft did hire most of Inflection AI's team members and paid them money to license their tech, it did not acquire the company.

If the FTC does believe the deal could still violate antitrust rules, it could launch a deeper investigation. It could also ask the courts to suspend the deal between Microsoft and Inflection AI while its probe is conducted.

Inflection AI's COO Ted Shelton is quoted as saying he was unaware of the FTC's informal probe into the deal with Microsoft. He pointed out that Microsoft is not an actual investor in Inflection AI. The company is now working under a new management team and is developing products for business customers, rather than for consumers, which it was doing before the Microsoft deal.