The way Big Tech companies have been acquiring parts of artificial intelligence developers or hiring strategic teams and employees has drawn the attention of Brazil’s antitrust watchdog, the Administrative Council for Economic Defense, known as Cade.
Instead of buying entire AI companies, Big Tech firms acquire stakes in startups or small companies with growth potential. That strategy keeps the deals outside Cade’s mandatory notification criteria, which are based on revenue.
On Wednesday (13), Cade’s tribunal ordered Microsoft to submit for review its 2024 transaction involving the hiring of employees and the purchase of services from Inflection AI. Once the deal is notified, Cade will review the case and may impose restrictions or even block the transaction in Brazil.
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The council members also ordered the opening of two investigations to determine whether similar transactions carried out by Google should have been notified. At the same session, other similar transactions were cleared from notification requirements.
Under Brazilian law, only deals involving one economic group with annual gross revenue of at least R$750 million in Brazil and another group with at least R$75 million must be submitted to the antitrust agency. The targets of these transactions do not meet those thresholds.
Review of strategic hiring
The cases reviewed at the session are very similar, Cade President Diogo Thomson said during the judgment. Thomson noted that merger control analysis covers not only mergers and acquisitions, but also other transactions that may lead to concentration, such as deals to hire teams of employees. “The absence of revenue, in such contexts, does not necessarily mean the absence of competitive relevance,” he said.
In all the cases reviewed, the council members stressed the importance of Cade analyzing these transactions even when they do not automatically require its approval. Council member Carlos Jacques said that, although revenue criteria are precise and necessary limits, reviews involving large technology companies and startups should consider not only revenue but also the effects on digital markets.
In the technology sector, the need for notification may arise from data, accumulated knowledge, user base or even future competitive potential, council member Camila Cabral Pires Alves said during the session. “Transactions below the revenue thresholds are not, for that reason alone, outside Cade’s field of attention. Cade must remain alert to arrangements that may involve relevant transfers of capabilities, technologies and strategic potential,” she said.
In the transaction between Microsoft Corporation and Inflection, Cade ordered notification within 30 days from the publication of the decision, based on Brazil’s antitrust law. The transaction involved corporate agreements and the hiring of former Inflection employees by Microsoft, in a coordinated arrangement between the companies.
Marcela Mattiuzzo, a partner at law firm VMCA, said the message from the rulings is that Cade considers the market relevant and will look more closely at this type of transaction, acting proactively and not only reactively.
“It is a different procedure, because it is not a typical notification; it is Cade calling the deal in for review,” she said. Mattiuzzo does not work on the cases judged Wednesday, but considers it relevant that Cade clearly signals how it will monitor the market.
Contacted by Valor, Google declined to comment. Microsoft said it will cooperate fully with Cade and ensure that the agency has access to the necessary information. Representatives for Inflection could not be reached.