The UK’s competition watchdog has cleared Microsoft after an investigation into its hiring of former employees and its partnership with US-based Inflection AI.

The Competition and Markets Authority opened a probe in July, concerned that the deal may lead to unfair competition in the AI chatbots arena, as both Microsoft and Inflection AI develop and supply these systems.

In March, Microsoft announced it had hired several former Inflection AI employees, including two of its co-founders, Mustafa Suleyman and Karén Simonyan.

Suleyman had previously co-founded Google Deepmind, and was hired as Microsoft’s head of its newly-formed AI unit.

The CMA noted that Microsoft’s hires consisted almost all of Inflection AI’s teams, and in the deal included access to Inflection’s IP and other technologies.

To rationalise their investigation, the CMA noted the ever-evolving nature of AI technology, and that the team of staff responsible for developing the core technology of Inflection AI would be valuable to any company seeking to advance their own foundational models or chatbots.

However, the CMA did note that prior to the ‘transaction’ of employees and resources with Microsoft, Inflection AI had a very small share of UK domain visits for chatbots and conversational AI tools, and had not been able to make a dent in the UK market, unlike many of its competitors.

The CMA actually found that without Microsoft’s intervention, Inflection AI would have likely continued to struggle in the UK market.

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Equally, the CMA found that Inflection’s involvement with Microsoft would push their offering to be a competitive constraint on Microsoft or other suppliers of foundational models to customers.

Microsoft reportedly paid $650 million (£495m) for its deal with Inflection, which will not require further investigation by the CMA. The influx of cash allowed the startup to reimburse its high-profile investors, which included Google CEO Eric Schmidt and Microsoft founder Bill Gates.

Microsoft has faced a number of CMA probes concerning its involvement in the AI sector, with its OpenAI partnership coming under specific and continued scrutiny over competition concerns.

However, the CMA has paused other probes as it waits for new digital powers to come to fruition after the passage of the novel Digital Markets, Competition and Consumer Act.