There willl be no EU investigation for Microsoft's acquisition of AI startup Inflection

EU flags outside the European Commission

The European Commission has announced that it will not open an investigation into Microsoft's acquisition of the majority of the staff and founders of AI startup, Inflection. In the deal, Microsoft hired Inflection's co-founders Mustafa Suleyman and Karen Simonyan and around 70 employees to set up a new AI unit inside the tech giant.

The deal has been called in by several EU member states that had urged the Commission to investigate it under the bloc's merger control rules over concerns it may distort competition in the AI sector. To date, all seven countries that filed a referral have now chosen to withdraw their requests.

While EU's top court had recently ruled against the Commission using its powers to clear such deals below the revenue thresholds, regulators said the Microsoft-Inflection agreement amounted to a structural market change.

The EU executive said (via Reuters);

All seven member states that submitted an initial referral have decided to withdraw their requests. Therefore, the Commission will take no decision in this matter.

The Commission regards the agreements entered into between Microsoft and Inflection as a structural change in the market that amounts to a concentration as defined under Article 3 of the EUMR.

While it declined to formally investigate the acquisition, the Commission said it considers the hiring deal between Microsoft and Infraction to constitute a concentration under EU merger rules.

Microsoft meanwhile welcomed the EU's decision, arguing that recruiting teams should not be subject to merger scrutiny. "We continue to be confident that the hiring of talent promotes competition and should not be treated as a merger," a Microsoft spokesperson said to Reuters.

The UK's Competition and Markets Authority (CMA) also approved the deal in early September. It took evidence from Microsoft, Inflection, and other market participants before deciding that the move wasn't anti-competitive.

The deal will see the Inflection team join Microsoft's AI operations as the firm expands its consumer-focused offering of AI.