In September 2024, the United Kingdom’s Competition and Markets Authority (CMA) investigated into Microsoft’s hiring of key personnel form Inflection AI. At face value, this appears to be like any other scrutiny of unfair market practices of a Big Tech company, the bread-and-butter of antitrust regulators.
Initially concerned that this constituted a merger, the CMA later concluded that Inflection AI was not a major competitor to Microsoft in the consumer chatbot market. Hence, the deal complied with antitrust regulation. However, there is more to this investigation than meets the eye. It may even offer a glimpse into how the CMA plans to position itself in the global competition law landscape.
At the very least, this development indicates a shift in the CMA’s approach to regulation. Orthodox considerations of consumer freedom and “undue advantages” over competitors prompted previous investigations into Microsoft’s bundling of its Teams software with its Office suite. Here, the CMA is expanding its scope of scrutiny beyond the nature of an acquisition to its impact. This includes considering a company’s size and market presence.
This shift may appear to demand a greater level of scrutiny and investigative effort from the CMA. However, the change in approach could instead create more effective regulation and improve the public profile of the CMA. In an age where innovation in digital product development happens at an accelerated pace, slow, bureaucratic investigations are becoming obsolete. It appears that the CMA has drawn some important lessons from the US Department of Justice. It took the agency 10 years to file a lawsuit against Apple for allegedly engineering an illegal monopoly in smartphones. Large-scale antitrust litigation is time-consuming and inefficient. The average consumer may not even feel the effects of a remedy (usually a fine) until years later. The effect on consumers is also unpredictable. The aftermath, should the US Government successfully break Google up, could be more inconvenient than expected.
Conversely, smaller, timely challenges that approach regulation with nuance (like the one involving Inflection AI) can serve a dual purpose. They remind Big Tech that large market share is not a carte blanche to act with impunity, whilst simultaneously ensuring that consumers are not unnecessarily troubled by every ripple in the regulatory landscape.
From a macro perspective, the latter approach could also make the UK a more conducive place to do business. Considering the recent news that the London Stock Exchange has seen the “biggest net outflow” in primary listings since the financial crisis, the CMA’s stance on antitrust regulation could serve as a major pull factor in the effort to boost London’s attractiveness as a business hub. The CMA appears to be savvier than we give them credit for.
With Credit To:
Uddin, Giusti, and Smith, “London Stock Exchange suffers biggest exodus since financial crisis”, Financial Times
Liedtke, Whitehurst, Balsamo, and Bajak, “Justice Department sues Apple, alleging it illegally monopolized the smartphone market”, The Associated Press
da Silva and Rahman-Jones, “Google threatened with being broken up by US”, BBC
Report, “Microsoft / Inflection inquiry”, Competition and Markets Authority
Further Reading:
The official CMA blog is a very useful resource to learn about competition and antitrust regulation in the UK. Visit: https://competitionandmarkets.blog.gov.uk/
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