Microsoft: EU says there will be no merger control over Microsoft’s hiring of Inflection workers

Microsoft’s hiring of employees of artificial intelligence startup Inflection, including its co-founders, will not be subject to scrutiny under European Union merger rules, EU antitrust regulators said on Wednesday.

The European Commission said seven EU countries had withdrawn their requests to investigate the deal. The move followed a ruling by Europe’s top court earlier this month barring the EU’s enforcement body from investigating mergers that fall below the EU’s merger revenue threshold.

The judges said the European competition authority also has no right to force national authorities to ask it to deal with such cases.

Critics say such merger powers are an abuse of the rules, and the Commission has said such deals can turn out to be killer takeovers, in which large companies acquire startups only to shut them down.

“All seven member states that submitted initial applications have decided to withdraw their applications. Therefore, the Commission will not take any decision on this matter,” the EU executive said.

However, the company said the deal amounts to a merger because it means the “new Inflection” will shift its focus to a different business, namely its artificial intelligence studio.

“The Commission considers the agreements between Microsoft and Inflection to constitute a structural change in the market that amounts to a concentration within the meaning of Article 3 of the EUMR,” it said, referring to the bloc’s merger rules. Microsoft welcomed the news.

“We continue to believe that hiring talented people is a competitive advantage and should not be considered a merger,” a Microsoft spokesman said.

In March, the company hired co-founders Mustafa Suleyman and Karen Simonyan and most of Inflection’s 70-person team to join a newly formed unit called Microsoft AI, which will consolidate and expand its AI offerings for consumer products.