FTC Opens Antitrust Probe of Microsoft AI Deal

The Federal Trade Commission is investigating whether Microsoft structured one of its latest deals with an artificial-intelligence startup to avoid a government antitrust review of the transaction. Microsoft in March hired Inflection AI’s co-founder and almost all of its employees and agreed to pay the startup around $650 million as part of a licensing fee to resell its technology. Inflection’s investors were told they would be repaid over time by the sales proceeds. Companies are required to report acquisitions valued at more than $119 million to federal antitrust-enforcement agencies, which have the option to investigate a deal’s impact on competition. The FTC or the Justice Department, which share antitrust authority, can sue to block mergers or other investments if an investigation finds the deal would substantially reduce competition or lead to a monopoly. FTC Chair Lina Khan has expressed concern that tech behemoths could eventually acquire or control the most promising AI applications, giving them a tight grip on systems that have humanlike abilities to converse, create art and write computer code. The FTC is now drilling down on Microsoft’s deal with Inflection, seeking information about how and why they negotiated their partnership.