ACM: European Court of Justice takes away opportunity to assess acquisition by Microsoft, new power is needed

By: Rick Van Tol (The Netherlands Authority for Consumers and Markets)

The Netherlands Authority for Consumers and Markets (ACM) has retracted its request for the European Commission to investigate Microsoft’s acquisition of the start-up company Inflection. ACM had initially raised concerns about the potential impact of this acquisition in the Netherlands, specifically regarding innovation and the available options for consumers and businesses in the field of Artificial Intelligence (AI). Several other Member States had also requested the European Commission to review the transaction.

However, a recent ruling by the European Court of Justice (ECJ) in the Illumina-Grail case clarified that the European Commission cannot process requests from Member States that lack jurisdiction to assess the transaction themselves. This decision highlights the importance of ensuring that acquisitions which might not meet the notification thresholds for the European Commission or ACM, but could still have adverse effects in the Netherlands, can be properly scrutinized. ACM has long advocated for such a review power.

Martijn Snoep, Chairman of the Board of ACM, stated: “It remains uncertain whether Microsoft’s strengthened position following the acquisition of Inflection will negatively impact consumers and businesses in the Netherlands by reducing options or stifling innovation. That is why we believed an investigation was warranted. Currently, there is no authority that can assess the effects of such acquisitions and prevent market dominance. To enable this, ACM requires a new power. This would also restore ACM’s ability to refer such acquisitions with cross-border effects to the European Commission.”

About the Inflection Acquisition
In March 2024, Microsoft acquired a substantial portion of Inflection’s staff (including two of its three co-founders) and obtained the intellectual property rights to Inflection’s AI model and its chatbot, Pi. Both companies are active in the AI space, particularly with AI chatbots—computer programs that simulate human conversations using artificial intelligence. One of Inflection’s key products is the AI chatbot Pi, which provides emotional support and advice to consumers. Pi’s success led to a rapid expansion of Inflection’s user base in a short time.

The acquisition did not require notification to the European Commission or ACM because the turnover thresholds were not met. Start-ups like Inflection often have relatively low revenue, despite representing significant value in the market. ACM argued that assessing the impact on Dutch consumers and businesses in the AI chatbot market was necessary. Concerns included the possibility that Microsoft’s acquisition could eliminate an innovative market entrant, ultimately reducing consumer choice and hindering innovation and competition in the AI chatbot market…

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