Microsoft avoids a comprehensive UK investigation into its recruitment of employees from AI company Inflection.

• The Competition and Markets Authority in the U.K. stated on Wednesday that Microsoft's acquisition of certain assets from AI company Inflection does not pose a substantial lessening of competition (SLC) due to horizontal unilateral effects.
• The agreement was considered an effective "merger" by it.
• Microsoft's multibillion-dollar investment into AI giant OpenAI is being probed by the CMA.

The U.K.'s competition regulator has cleared the hiring of employees from Inflection AI, an artificial intelligence startup founded by DeepMind co-founder Mustafa Suleyman, and no in-depth competition investigation will be conducted in the country.

The Competition and Markets Authority (CMA) declared on Wednesday that the U.S. tech giant's acquisition of "certain assets" from Inflection qualifies as a "relevant merger situation" in Britain. However, the CMA concluded that the deal does not create a "realistic prospect of a substantial lessening of competition (SLC) as a result of horizontal unilateral effects."

In March, Microsoft appointed Suleyman as its executive vice president and CEO of Microsoft AI, along with other key employees from Inflection. The newly formed unit of Microsoft will focus on its artificial intelligence products, including Copilot, the company's AI assistant, which it integrated into Windows and Microsoft 365.

Microsoft appointed Karen Simonyan as its chief scientist, who previously worked at DeepMind, the -owned AI lab. In addition to Simonyan, Microsoft also named Suleyman as its new role, who was also a former employee of DeepMind.

The CMA launched an initial merger investigation into Microsoft's acquisition of Inflection talent in July, as it believed the deal could potentially violate U.K. rules and lead to a "substantial lessening of competition" in the AI industry.

On Wednesday, the CMA concluded that Microsoft's arrangement with Inflection did not pose a substantial threat to competition, but it still considered the agreement to be an effective merger.

Microsoft was not immediately available for comment when contacted by CNBC Wednesday.

The CMA evaluated Microsoft's involvement with Inflection AI and the recruitment of its employees as potential threats to competition.

The regulator announced on Wednesday that the arrangements included a "nonexclusive licensing deal to utilize Inflection IP in various ways."

Microsoft has not disclosed any information about a licensing agreement with Inflection, except that it hired "several members" of the company's 70-person team. According to Reuters and The Wall Street Journal, the company paid Inflection $650 million in licensing fees to sell its AI models through its Azure cloud computing platform.

In addition to evaluating the inflection arrangement with a Big Tech company and AI startup, regulators in the U.K. are also conducting a separate ongoing probe into Microsoft's multibillion-dollar investment into AI giant OpenAI. Furthermore, the CMA is investigating whether a tie-up between Amazon and AI company Anthropic constitutes a merger that may harm competition.

Both Microsoft and Amazon have stated that their partnerships with smaller AI companies are not mergers, as the companies they're investing in and partnering with are operating independently.

The Federal Trade Commission in the U.S. is examining various agreements between major tech corporations and AI startups, including Microsoft's partnership with Inflection.