The British competition authority (CMA) has officially launched an investigation into Microsoft's hiring of employees from the start-up Inflection AI, amidst the growing global regulatory scrutiny of investments by technology giants.

The CMA stated on Tuesday that it had "sufficient information" regarding Microsoft's hiring of "certain former employees of Inflection AI and the conclusion of related agreements with Inflection" to initiate an investigation.

The decision to initiate a formal merger investigation follows an invitation from the regulatory authority in April to submit comments on the connection between Microsoft and Inflection AI, amid broader concerns regarding acquisitions in the rapidly evolving AI industry.

The CMA set September 11 as the deadline for a possible escalation of the investigation to the next level.

Microsoft expressed confidence that "hiring talent promotes competition" and that the agreement with Inflection "should not be treated as a merger." The technology company added that it would provide the CMA "with the information it needs to complete its investigations promptly.

Microsoft paid $650 million in March to hire the CEO of Inflection, Mustafa Suleyman, a co-founder of Google's DeepMind, as well as several other team members and to license its technology. The company had previously invested $1.3 billion in Inflection as part of a financing round.

Inflection was founded in 2022 as a consumer AI company and offered a chatbot product called Pi. However, since March, the company has focused on selling AI software to businesses after most of its employees moved to Microsoft.

The move raised regulatory and legal concerns as it resembled a takeover by Microsoft, but did not fall under the formal takeover rules.

The CMA announced in April that it would investigate whether the partnerships between Microsoft and Amazon with AI startups, including the deal between Microsoft and Inflection, fall under UK merger regulations.

Microsoft and Inflection emphasized at the time that the agreement was not an acquisition and that Inflection would remain an independent company.

This connection is not the only Big Tech AI agreement that has drawn the attention of regulators in the USA, the EU, and the UK.

Microsoft relinquished its observer status on the board of OpenAI this month, while Apple stated that it would not take up a similar position, given the growing scrutiny by global regulators on investments in AI start-ups.

The European Commission announced in June that it is considering the possibility of an antitrust investigation into the Microsoft-OpenAI deal after deciding not to initiate an investigation under merger control rules.

The Federal Trade Commission in the USA has also begun investigating investments by large technology companies, including Microsoft, Amazon, and Google, in generative AI start-ups.