Microsoft has successfully dodged an in-depth competition investigation by the UK’s Competition and Markets Authority (CMA) regarding its acquisition of talent from Inflection AI. The CMA announced on Wednesday that while Microsoft’s arrangement with Inflection, an AI startup founded by DeepMind co-founder Mustafa Suleyman, is classified as a "relevant merger situation" under UK regulations, it does not present a realistic prospect of a substantial lessening of competition.

This decision comes after the CMA had initially referred Microsoft’s hiring of key Inflection employees, including Suleyman and Karen Simonyan, for an investigation. The regulator's primary concern was whether the hiring could impact competition within the AI sector, potentially resulting in a "substantial lessening of competition." However, after thorough evaluation, the CMA concluded that the deal does not meet this threshold, although it still regards it as an effective merger.

Microsoft's hiring of Suleyman, who was appointed as the executive vice president and CEO of Microsoft AI, alongside Simonyan, formerly a chief scientist at DeepMind, was part of a broader strategy to enhance its AI capabilities. The tech giant's new unit will focus on expanding its artificial intelligence products, including its AI assistant, Copilot, which integrates into Windows and Microsoft 365.

In addition to acquiring talent, Microsoft has entered into a nonexclusive licensing deal with Inflection AI to use its intellectual property. While specific details of this licensing arrangement were not disclosed by Microsoft, reports suggest that Microsoft paid Inflection $650 million in licensing fees, allowing it to resell Inflection’s AI models through its Azure cloud computing platform.

The CMA’s decision comes amidst other regulatory scrutiny in the tech sector. The regulator is also investigating Microsoft’s significant investment in AI company OpenAI and reviewing Amazon’s potential merger with AI firm Anthropic. Both Microsoft and Amazon maintain that their partnerships and investments do not constitute mergers that would harm competition.

In the U.S., the Federal Trade Commission is similarly reviewing deals between major tech companies and AI startups, including Microsoft’s arrangement with Inflection AI. These reviews underscore the growing regulatory attention on how tech giants are expanding their influence and capabilities in the rapidly evolving AI sector.

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