EU won’t scrutinize Microsoft’s acquihire of Inflection under EU merger rules

The European Commission announced that it “takes note of the withdrawal of the initial referral requests by seven Member States to review under Article 22 of the EU Merger Regulation the acquisition of certain assets of Inflection AI, Inc. by Microsoft Corporation. The deadline for the Commission to decide upon these requests was 19 September 2024. Following the judgment by the Court of Justice of the European Union of 3 September 2024 in the Illumina/GRAIL case, holding that Member States cannot refer a transaction to the Commission under Article 22 of the EUMR when not competent to review the transaction under their national merger control rules, 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… Upon review of the details of the transaction and its implementation, based on information provided to the Commission by Microsoft and Inflection, the Commission considers that the transaction involves all assets necessary to transfer Inflection’s position in the markets for generative AI foundation models and for AI chatbots to Microsoft. Further, in view of Inflection’s announcement on 19 March 2024 that the ‘new Inflection’ would shift its focus to a different activity, namely its AI studio business, 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.”