TLDR: Antitrust authorities in the UK and EU are significantly broadening their merger control regulations to address the rapid growth and consolidation within the artificial intelligence sector. This expanded focus targets strategic AI partnerships, minority investments, and ‘killer acquisitions’ by major tech firms, aiming to prevent anti-competitive practices and foster innovation. New legislative changes and increased monitoring efforts are being implemented to capture deals that traditionally fell below conventional merger thresholds.
Antitrust authorities across the United Kingdom and the European Union are actively expanding their merger control frameworks to address the burgeoning artificial intelligence (AI) sector, signaling a concerted effort to prevent market consolidation and foster fair competition. This intensified scrutiny, particularly of strategic AI partnerships, comes amidst a global surge in AI investment, which reached approximately USD 252 billion in 2024, marking a thirteen-fold increase since 2014.
Both the UK’s Competition and Markets Authority (CMA) and the European Commission (EC) are keenly observing how large digital companies leverage their financial power and access to critical resources like data, computing power, and specialized personnel to form alliances with smaller, innovative AI developers. These partnerships, often structured as non-traditional mergers and acquisitions, frequently involve significant investments and the acquisition of core teams, intellectual property, and know-how, yet may not trigger conventional turnover-based merger control thresholds.
Key Regulatory Developments in the UK: Effective January 1, 2025, significant changes to the UK merger control regime came into force under the Digital Markets, Competition and Consumers Act 2024 (DMCC Act). The target UK turnover threshold for merger reviews has increased to £100 million (from £70 million). Additionally, a new ‘hybrid threshold’ has been introduced, allowing the CMA to scrutinize transactions where one party has a UK turnover exceeding £350 million and a 33 percent UK share of supply, and the other party has a specified UK nexus. This aims to strengthen the CMA’s jurisdiction over ‘killer acquisitions’ – deals designed to eliminate nascent competitors.
The UK is also notable for its ability to review non-controlling minority shareholding acquisitions under a ‘material influence test.’ This lower threshold enables the CMA to intervene in deals that do not necessarily result in a change of control, providing a broader scope for intervention compared to the EU’s ‘lasting change of control’ standard.
EU’s Evolving Approach to AI Competition: The European Commission has demonstrated a strong commitment to monitoring big tech companies’ investments and acquisitions in the AI sector. In July 2024, the EC, alongside the CMA, the US Department of Justice (DOJ), and the Federal Trade Commission (FTC), signed a joint statement on competition in generative AI foundation models and AI products, indicating a global alignment in addressing potential competition concerns.
In September 2024, the EC published a competition policy brief specifically focusing on potential competition issues in AI and virtual worlds. The Digital Markets Act (DMA) also plays a crucial role, requiring designated ‘gatekeepers’ to inform the EC of any deals, irrespective of whether they meet traditional merger control thresholds. As of March 3, 2025, gatekeepers had already informed the EC of 25 such transactions.
While the EC’s expanded approach to Article 22 referrals (allowing Member States to refer below-threshold mergers for review) faced a setback with the Illumina/Grail judgment in September 2024, regulators remain vigilant. The EU is also proactively investing in its AI capabilities, with European Commission President Ursula von der Leyen announcing the ‘InvestAI’ initiative on February 11, 2025. This initiative aims to mobilize EUR 200 billion for AI investments, including a new European fund of EUR 20 billion for AI ‘gigafactories,’ to enhance the EU’s global competitiveness in AI markets.
Notable Cases and Industry Impact: The partnership between Microsoft and OpenAI has been a prominent example attracting significant regulatory attention. Microsoft has invested over US$13 billion in OpenAI between 2019 and 2024. While authorities initially concluded that this partnership did not qualify as a merger, ongoing scrutiny highlights the potential for such alliances to raise merger control concerns. Notably, amendments to their partnership agreements in January 2025 granted OpenAI greater flexibility in sourcing compute from third parties, with Microsoft’s exclusivity scaled back to a first refusal right, reducing OpenAI’s operational reliance.
Another case, the partnership between Microsoft and Inflection, was reviewed by the CMA, which concluded it did not raise competition concerns in the development and supply of consumer chatbots and foundation models.
Also Read:
- Nvidia Pledges Up to $100 Billion for OpenAI’s Next-Generation AI Data Centers
- UK Think Tank Advocates for Enhanced AI Regulation Through Existing Bodies, Not New Legislation
As AI markets continue their rapid evolution, competition authorities worldwide are expected to further refine their frameworks to effectively capture and address the complex dynamics of AI collaborations, ensuring fair competition and continued innovation.
