UK Antitrust Regulator to Launch Formal Investigation into Alphabet's $2.3 Billion Investment in Anthropic

The UK's Competition and Markets Authority (CMA) is investigating Alphabet's $2.3 billion investment in AI startup Anthropic. Following a public comment period earlier this summer, the CMA announced on Thursday that it has gathered enough information to initiate a preliminary investigation into whether this investment negatively impacts competition in UK markets.

The CMA's investigation process consists of two phases. The first phase assesses whether there is sufficient evidence for a more in-depth examination. If warranted, the investigation would then proceed to the optional second phase, where the CMA collects comprehensive evidence before making a regulatory decision.

The formal investigation will begin on Friday, with the CMA expected to decide by December 19 whether to advance to phase two.

In response to the investigation, Google clarified that Anthropic is not locked into using its cloud services. A Google spokesperson stated, “Google is committed to fostering an open and innovative AI ecosystem. Anthropic has the freedom to work with multiple cloud providers, and we do not demand exclusive tech rights.”

Tech media outlet reports that Alphabet's financial involvement in Anthropic began with a $300 million investment in early 2023, followed by an additional $2 billion later that year. Such scenarios are often termed "quasi-mergers," where major tech firms gain significant influence over emerging startups through substantial investments and recruitment of key personnel.

Interestingly, Amazon's investment in Anthropic surpasses that of Alphabet, totaling $4 billion. After a public comment period, the CMA chose not to investigate Amazon's funding last month, citing current regulations. Specifically, Anthropic's UK turnover did not exceed £70 million, and the aggregate market share, including both parties, did not surpass 25% in the domain of AI large language models (LLMs) and chatbots.

While the CMA hasn't specified the concerns regarding Alphabet's investment, it suggests deeper scrutiny may be warranted, particularly given that Google's Gemini directly competes with Anthropic's Claude, with both companies developing LLMs aimed at small businesses and enterprise customers.