The red-hot race for dominance in artificial intelligence (AI) is facing a new hurdle. This time, the United Kingdom’s Competition and Markets Authority (CMA) has launched preliminary investigations into the collaborative ventures forged by tech behemoths Microsoft and Amazon with several AI startups, which also resulted in several billion dollars being poured into them. This comes at a time when there are rising concerns mounting over the potential impact of Big Tech investments on market competition, especially in the rapidly-advancing AI sector.

The CMA’s probe centers on specific partnerships – Microsoft’s tie-ups with Mistral AI and Inflection AI (and possibly even OpenAI), and Amazon’s collaboration with Anthropic. However, the investigation extends beyond these individual deals. The regulator has identified a broader trend – a complex network of over 90 partnerships and investments involving these major tech players in the AI space. This “interconnected web,” as the CMA terms it, raises concerns that Big Tech could be wielding these arrangements strategically to gain an unfair advantage and ultimately stifle competition in the crucial AI sector.

A key concern is that these partnerships might function as a backdoor to mergers, effectively bypassing the traditional regulatory hurdles associated with full acquisitions. By structuring these deals as collaborations or investments rather than outright acquisitions, tech giants might be circumventing regulatory scrutiny and potentially consolidating their dominance in the AI landscape. This concern is amplified by the sheer volume of partnerships involved. Now, the CMA is inviting views by May 9.

“We will assess, objectively and impartially, whether each of these 3 deals fall within UK merger rules and, if they do, whether they have any impact on competition in the UK,” Joel Bamford, executive director of mergers at the CMA, commented on the matter. “While we remain open-minded, and haven’t drawn any conclusions, our aim is to better understand the complex partnerships and arrangements at play,” Bamford added.

The CMA’s investigation isn’t solely focused on formal partnerships. The regulator is also casting a scrutinizing eye on Microsoft’s recent hiring of key personnel from Inflection AI, a move that could be seen as a way to acquire vital expertise without triggering a full-blown merger review. And if this is not enough, the investigation is also delving into the emerging area of foundational models. These models essentially serve as the building blocks upon which many other AI systems are constructed.

“Foundation models have the potential to fundamentally impact the way we all live and work, including products and services across so many U.K. sectors – healthcare, energy, transport, finance and more,” Bamford further noted. “So open, fair, and effective competition in foundation model markets is critical to making sure the full benefits of this transformation are realised by people and businesses in the U.K., as well as our wider economy where technology has a huge role to play in growth and productivity.

In response to the CMA’s investigation, both Microsoft and Amazon have defended their partnerships with AI startups. Microsoft noted that common business practices, such as talent acquisition and fractional investments, are essential for promoting competition and innovation in the sector. “By investing in Anthropic, which has just released its industry-best new Claude 3 models, we’re helping make the generative AI segment more competitive than it’s been the last couple of years,” the spokesperson for Amazon noted. “And, customers are very excited about the opportunities this collaboration is providing them. We’re confident that the facts speak for themselves, and hope the CMA agrees to resolve this quickly.”