CADE analyses cases on AI and digital markets

On 13 May, the Administrative Council for Economic Defense (CADE) decided to dismiss three cases, order the notification of the transaction between Microsoft and Inflection, and launch two administrative procedures to investigate the transactions between Google and Windsurf, as well as Google and Hume AI.

Diogo Thomson, Interim President of CADE, emphasised that transactions in the digital, technology, and AI markets may lead to significant exchanges of assets, capabilities, technology, intellectual property, key employees, and competitive advantage, even if the companies involved have no significant turnover in Brazil.

“In such cases, CADE performs as an outstanding mechanism to fix the mandatory notification system, exhausting all possibilities of potential competition concerns within the legal limits,” he said. The statement was endorsed by all Commissioners, and included in the Rapporteurs’ opinions in each case decided on this matter.

NVIDIA Corporation and Run:ai Labs Ltd

The agency reviewed the acquisition of the Israeli technology company Run:ai Labs Ltd, specialised in a software platform to organise and optimise the use of computers for AI applications, by the global leader of graphics processing units (GPU), NVIDIA Corporation.

The investigation was launched ex officio solely to determine whether the transaction was supposed to be notified in advance to CADE, as required by the Brazilian Competition Law, given NVIDIA’s global significance and the strategic importance of AI.

After examining the turnover figures, the Tribunal found that the parties’ turnover in Brazil did not meet the minimum criteria required to notify CADE in the year prior to the transaction. Furthermore, there were no significant effects on the Brazilian market, since Run:ai Labs Ltd does not operate in the country, and the parties have no market power in Brazil.

The authority also considered whether it should invoke an exceptional provision of the law that allows it to review transactions which may harm competition, even if they do not meet the minimum turnover criteria, especially in digital markets where innovative start-ups are involved.

However, it was concluded that there is no harm to competition in Brazil that would justify such measure. As a result, CADE decided to dismiss the case, recognising that the

transaction did not need to be notified to the agency.

Google Brasil Internet Ltda. and Character Technologies, Inc 

The transaction between Google and Character.AI, involved the licensing of technology and intellectual property, as well as the release of specialist professionals, for subsequent recruitment by Google.

Camila Alves, rapporteur of the case, emphasised that such transactions may have competitive significance even without a formal corporate acquisition, particularly concerning technology, specialist teams, technical expertise, and innovation capabilities in AI markets.

Therefore, the transaction had elements that justified the review, but it did not automatically lead to a mandatory notification to CADE. It was considered the practical utility of the measure, the proportionality of an ex post analysis, legal certainty, time lapse since the transaction, and existence of alternative institutional actions.

Consequently, the case was dismissed with no implication that such decision constitutes an automatic approval of future transactions involving technology licensing, coordinated team recruitment, acqui-hire, or reverse acqui-hire in the AI field.

Moreover, an investigation of the transactions between Google and Windsurf was launched, as well as Google and Hume AI, in addition to CADE forwarding the decision to the Department of Economic Studies for further study in future researches. Access Case no. 08700.005638/2024-37

Microsoft Corporation and Mistral AI

In 2024, the Office of the Superintendent General (SG) launched an administrative procedure to investigate a contract between Microsoft and Mistral AI, concerning Microsoft’s investment in Mistral, the provision of cloud-based supercomputing infrastructure by Microsoft, and the availability of Mistral models on the Azure platform.

José Levi, rapporteur of the case, considered that Microsoft had not acquired the control of Mistral, since Microsoft’s shareholding was under 5%, although alleged horizontal or vertical links between the companies were identified. In addition, there was no evidence of harm to the competitive environment.

Finally, he decided to dismiss the case, as it was not subject to mandatory notification to CADE, and it did not meet the criteria provided in Law 12529/2011.

Access Case no. 08700.005961/2024-19

Microsoft Corporation and Inflection AI

The case investigates a contract that was executed between Microsoft Corporation and Inflection AI, covering corporate agreements between the parties for the licensing of Inflection’s technology, as well as Microsoft’s recruitment of almost all of Inflection’s former employees.

The rapporteur of the case, José Levi, analysed that the main assets of AI start-ups are often their intellectual property and skilled professionals. Thus, the arrangements agreed between Microsoft and Inflection reflect the economic logic of conventional acquisitions and, despite their unconventional form, are subject to CADE’s ex ante regulation.

Although the notification of the merger was not mandatory, since the turnover did not meet the minimum criteria, Mr Levi considered it appropriate and timely for CADE to review the transaction.

It was highlighted that there is a need to analyse the applicability of Article 88, paragraph 7, of Law 12529/2011, mainly in digital market cases, where the criteria of domestic turnover may not reflect the market relevance properly, or even the market power of the operators involved.

Therefore, due to the competition concerns identified, CADE determined the companies to notify the transactions within 30 days after the publication of the decision.

Access Case no. 08700.005966/2024-33