The UK’s Competition and Markets Authority (CMA) has begun a formal investigation into Alphabet’s $2.3 billion investment in Anthropic, an AI startup known for its Claude chatbot. The CMA is looking into whether Alphabet’s investment in Anthropic harms competition in the UK’s AI market, where both companies are active, particularly in developing large language models (LLMs).
Alphabet’s investment has come in stages, with $300 million invested early in 2023 and another $2 billion later in the year. This raised concerns that Alphabet might be gaining undue influence over Anthropic, a phenomenon often referred to as a “quasi-merger.” This occurs when large tech companies use significant investments and the hiring of key personnel to gain control of smaller, innovative startups without an official merger.
CMA Investigation Process and Timeline
The CMA’s review process is structured in two stages:
- Phase 1: A preliminary assessment to determine whether there is sufficient evidence of potential competitive harm to move forward.
- Phase 2: A deeper investigation where the CMA gathers more detailed information before deciding on the regulatory outcome, if the initial phase finds concerns.
The current probe will officially begin this Friday, and the CMA is expected to decide by December 19, 2024, whether to proceed to phase 2 of the investigation.
Anthropic has also attracted other significant investors, including Amazon, which has invested $4 billion in the startup. The CMA had considered investigating Amazon’s investment but decided against it because Anthropic’s UK revenue was below £70 million and their partnership did not control 25% or more of the market in LLMs or chatbots. However, the CMA determined that Alphabet’s investment did meet the criteria for a deeper review.
A spokesperson for Alphabet subsidiary Google said that Anthropic is free to use multiple cloud providers and that Alphabet does not require exclusive technology rights from the startup. Despite this, the CMA stated that it had enough information to warrant the investigation.
This marks another step in the CMA’s efforts to scrutinize tech giants’ investments in startups, especially when such deals could potentially stifle competition. The next steps of the investigation will reveal whether Alphabet’s significant financial backing of Anthropic raises any further regulatory red flags.
