The U.K. antitrust regulator has initiated an early-stage inquiry into Google's investment relationships with Anthropic, the AI startup under the Alphabet umbrella. This investigation, conducted by the Competition and Markets Authority (CMA), is not yet a formal probe. However, the CMA is soliciting feedback from stakeholders and interested parties regarding whether Google's partnership with Anthropic has led to a “relevant merger situation” and whether this could cause a “substantial lessening of competition” within the U.K. market.
Founded in 2021 in San Francisco, Anthropic is dedicated to creating AI systems with an emphasis on safety, transparency, and risk mitigation. It distinguishes itself as a public benefit corporation (PBC) and is known for its large language models (LLMs), including a chatbot named Claude, which is comparable to OpenAI's ChatGPT and Google's Bard. Since its founding, Anthropic has secured nearly $10 billion in funding, with Google initially investing a reported $300 million early last year, followed by an additional $2 billion. In addition to Google's backing, Anthropic has attracted significant investments from other major players, including a $4 billion investment from Amazon.
The flurry of investment activity has prompted regulatory scrutiny, raising concerns that major technology firms might be engaging in a new type of merger and acquisition strategy aimed at maintaining influence over emerging innovators while avoiding the extensive regulatory scrutiny tied to formal acquisitions. This so-called quasi-merger approach may involve hiring startup founders, attracting skilled talent, or strategically investing in these competing entities.
Investigations
The CMA previously announced its inquiries into several such deals, including Microsoft’s recent investment in the French startup Mistral AI. However, they determined that this investment did not meet the criteria for formal investigation under existing merger regulations due to its relatively small size. The CMA is also examining Amazon's connections to Anthropic and is expected to launch a comprehensive investigation into Microsoft's close collaboration with OpenAI, the developer behind ChatGPT.
Earlier this month, the CMA confirmed that it is conducting a full regulatory probe into Microsoft for hiring the core team from Inflection AI, a rival to OpenAI, in which Microsoft had previously invested. Interested parties have until August 13, 2024, to submit comments to the CMA regarding the investigation, although there is no certainty that it will advance to a formal “phase 1” investigation. The CMA’s decision may largely depend on the nature of Google's stake in Anthropic. If it determines that Google's investment is minority in nature and lacks substantial control over the startup, it may dismiss the inquiry, similar to its conclusion regarding Microsoft’s stake in Mistral AI.
“We intend to cooperate with the CMA and shed light on Google’s investment as well as our ongoing commercial collaboration,” an Anthropic spokesperson stated. “We operate as an independent entity, and our strategic partnerships or investor relationships do not compromise our governance or our ability to work with different partners. Our independence is crucial to fulfilling our mission as a public benefit organization and to cater to our users’ preferences for accessing Claude.”
A spokesperson for Google emphasized its commitment to fostering an open and innovative AI ecosystem, clarifying that it does not require Anthropic to use Google Cloud as a condition of their partnership.
“Anthropic is free to utilize various cloud service providers, and we do not impose exclusive technology rights,” the spokesperson stated.
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