The UK competition watchdog has officially launched an inquiry into Microsoft’s hiring of staff from start-up Inflection AI, as global regulatory scrutiny of investments by technology groups deepens.

The Competition and Markets Authority said on Tuesday that it had “sufficient information” in relation to Microsoft’s hiring of “certain former employees of Inflection AI and its entry into associated arrangements with Inflection, to enable it to begin an investigation”.

The move to launch a formal merger inquiry comes after the regulator in April invited comments about the Microsoft-Inflection tie-up, as part of broader concerns about dealmaking in the fast-developing AI industry.

The CMA said the deadline for it to escalate its probe to the next level was September 11.

Microsoft said it was “confident that the hiring of talent promotes competition” and that the Inflection deal “should not be treated as a merger”.

The tech group added that it would provide the CMA with “the information it needs to complete its inquiries expeditiously”.

Microsoft, which participated in a $1.3bn funding round for Inflection last year, paid $650mn in March to hire the start-up’s chief executive Mustafa Suleyman, co-founder of Google’s DeepMind, alongside several other team members, and to license its technology.

Inflection was founded as a consumer AI company in 2022, with a chatbot product called Pi. Since March, it has pivoted to selling enterprise AI software to businesses after most of its staff left to join Microsoft.

The move drew scrutiny from regulators and legal experts on grounds that it looked similar to an acquisition by Microsoft but was not subject to formal acquisition rules.

The CMA said in April that it was seeking views on whether the partnerships struck by Microsoft and Amazon with AI start-ups, including Microsoft’s deal with Inflection, “fall within UK merger rules”.

Microsoft and Inflection stressed at the time that the agreement was not an acquisition and that Inflection remained an independent company.

The tie-up is far from the only Big Tech AI deal that has drawn the attention of regulators in the US, EU and UK.

Microsoft this month gave up its seat as an observer on the board of OpenAI while Apple said it would not take up a similar position, amid growing attention by global regulators on investments in AI start-ups.

The European Commission said in June it was exploring the possibility of an antitrust investigation into the Microsoft-OpenAI tie-up after it said it would not proceed with a probe under merger control rules.

The Federal Trade Commission in the US has also begun scrutinising investments made by big tech companies including Microsoft, Amazon and Google into generative AI start-ups.

Microsoft’s new “strategic partnership” with French artificial intelligence company Mistral AI faces scrutiny in Europe, with some critics in the parliament saying they are “furious” about it as the EU AI Act was changed to meet the demands of companies such as Mistral.

The French AI champion unveiled its new large language model (LLM) on Monday, with it set to become available to Microsoft’s Azure cloud customers in a dramatic shake-up for the start-up.

“On a technical level and a political level in the [European] Parliament, we are extremely furious because the French government for months was making this argument of European leadership, meaning that those companies should be able to scale up without help from Chinese or US companies,” said Kai Zenner, head of office and digital policy adviser for Axel Voss, an MEP from the European People’s Party (EPP).

“They were always blaming the Parliament that we are making it kind of impossible, for those national champions, unicorns to try to compete with their global competitors”.

EU countries recently agreed on the technical details of the EU’s AI Act, but only after mammoth negotiations during which France in particular pushed for concessions for open source companies like Mistral.

Zenner also said Mistral AI was making the argument that if their wishes were not fulfilled they would be forced to cooperate with companies like Microsoft.

“Now they got all their wishes, and they do it anyway and I find this is just ridiculous”.

He claims that the EU AI Act’s final version was rushed and the rules will be “attacked in front of courts” due to the concessions.

The partnership is also set to be looked into by the European Union’s competition watchdog, which also last month began looking into Microsoft’s multibillion-dollar deal with OpenAI.

“The Commission is looking into agreements that have been concluded between large digital market players and generative AI developers and providers,” a European Commission spokesperson told Euronews Next in an email.

“In this context, we have received the mentioned agreement, which we will analyse”.

India’s premier investigating agency, the Central Bureau of Investigation (CBI), has filed a charge sheet against former Air India Chief Managing Director, SAP India, and IBM India for alleged irregularities in acquiring an ERP solution by Air India in 2011.

CBI had registered the case based on the recommendations of the Central Vigilance Commission (CVC), which detected irregularities. As per a report by the Times of India, Air India opted for SAP and IBM’s ERP solution for $27 million (Rs 2,250 million) without going through a proper tendering process.

At the time, Air India was owned by the government and was required to get approval from the Civil Aviation Ministry for any major purchase. As per CVC, Air India failed to acquire this approval even though it made a presentation to the Group of Secretaries and Group of Ministers. Air India was taken over by the Tata Group in 2022.

The chargesheet is now filed against former Air India Chairman and Managing Director, Arvind Jadhav, IBM India, and SAP India, among six others under the IPC (Indian Penal Court) section 120-B (criminal conspiracy and provisions of the Prevention of Corruption Act), after six years of investigation.

CVC has also alleged that Air India awarded the contract to SAP and IBM even when it was already using Oracle’s ERP. SAP and IBM did not respond to the questionnaire shared with them on this development at the time of publishing.