UK Antitrust Enforcer Warns about Big Tech’s Dominance over GenAI

The Competition and Markets Authority (CMA) of the U.K. has expressed concern over the monopolized control of Big Tech firms in the progressing AI market. Sarah Cardell, the CEO of CMA, voiced serious worries about the unfolding dynamics in this sector.

In its recently released Update Paper on the foundation of AI models, the CMA warned about the escalating consolidation and intermeshing among tech firms. These firms are the driving force behind the surge in AI tools generation.

According to the CMA’s paper, Google, Amazon, Microsoft, Meta, and Apple (GAMMA) consistently show up throughout the AI value chain involving computing, data, model development, collaborations, and distribution platforms. While the regulator acknowledged the competitive role such partnerships could play in the technology landscape, it also warned about the potential competitive risks posed by powerful partnerships and integrated firms, which might counteract open markets.

Image Credits: CMA’s Foundation Models. Update Paper

“We are alarmed that the Foundational Model (FM) sector is evolving in ways that could lead to adverse market consequences,” expressed the CMA, highlighting a form of AI that requires high quantities of data and computing power and might be utilized for a range of applications.

“Particularly, the increasing prevalence across the FM value chain of a few incumbent technology firms, which already possess significant market power in many of today’s crucial digital markets, could drastically mold FM-related markets to the detriment of fair and effective competition. It could potentially harm businesses and consumers by reducing options and quality, and raising prices,” the organisation cautioned.

The CMA embarked on an initial examination of the AI market’s top tier the previous May. It released guidelines for “responsible” generative AI evolution which it stated would inform its regulation of the rapidly evolving market. However, Will Hayter, senior director of the CMA’s Digital Markets Unit, confessed to TechCrunch last autumn that the organization was not in a hurry to regulate advanced AI, preferring to let the market have the opportunity to grow.

Since then, the authority has moved to examine the close ties between OpenAI, the creators of the viral AI chatbot ChatGPT, and Microsoft, a significant investor in OpenAI. Its update report notes the rapid rate of transformation in the marketplace. For example, it highlighted a report last year by Ofcom, the internet regulator in the UK, which discovered that 31% of adults and 79% of 13- to 17-year-olds in the UK have used a generative AI tool, such as ChatGPT, Snapchat My AI, or Bing Chat (also known as Copilot). This evidence suggests the CMA is revising its initial relaxed stance on the Generative AI market in face of the commercial “storm” that is consuming computing power, data, and talent.

UK’s antitrust watchdog announces initial review of generative AI

The Update Paper points to three major connected risks that threaten fair, effective and open competition, which are reflected in the pervasiveness of GAMMA: (1) Companies that control critical inputs for the creation of foundational models, also known as general-purpose AI models. These companies can potentially limit accessibility and create obstacles against competition. (2) The potential for tech giants to use their dominance in consumer or business markets to manipulate the choices available for GenAI services and limit competition in the delivery of these tools. (3) Collaboration between major players which, according to the CMA, might enhance existing market power positions throughout the value chain.

CMA

A speech given on Thursday in Washington, D.C., at a legal event concerning generative AI, Cardell drew attention to the “winner-take-all dynamics” that were observed in previous periods of web development. During these times, Big Tech solidified their Web 2.0 empires while regulators remained inactive. She emphasized the necessity of ensuring that competition regulators avoid making the same errors with this new era of digital development.

“The advantages we hope will result from sophisticated AI—for businesses and consumers, including quality, choice, and price, as well as the most innovative developments—are more likely in an environment where these companies are exposed to fair, open, and effective competition, rather than one in which they merely utilize foundation models to further consolidate and expand their existing digital market power,” she stated. To prevent a handful of companies with unprecedented market dominance from controlling not only the construction and design of the most powerful models but also their integration and use throughout all sectors of our economy and lives, she believes it is crucial to take action now.

What plans does the CMA have to intervene in the AI market? As of now, it has not proclaimed any specific actions. However, Cardell revealed that it is intensifying its merger review usage and keeping a close watch on GAMMA’s partnerships to see if any of these agreements fall within existing merger regulations.

This could grant official investigative authority, and possibly the power to block relationships deemed to be against competition. However, up to this point, the CMA hasn’t gone that far, despite growing concerns about the comfortable relationship between GAMMA GenAI. The exploration of the connection between OpenAI and Microsoft—whether it constitutes a “relevant merger situation”—is still ongoing.

According to Cardell, some of these agreements are quite intricate and non-transparent, so we might lack enough information to evaluate this threat without exercising our merger control powers to gain that knowledge. It’s possible that some agreements not covered by merger laws are problematic, even if merger control can’t fix them. Such agreements might be designed to avoid merger rules or they might not lead to competitive concerns.

“By stepping up our merger review, we hope to gain more clarity over which types of partnerships and arrangements may fall within the merger rules, and under what circumstances competition concerns may arise — and that clarity will also benefit the businesses themselves,” she added.

The CMA’s Update report sets out some “indicative factors,” which Cardell said may trigger greater concern about and attention to FM partnerships, such as the upstream power of the partners, over AI inputs; and the downstream power, over distribution channels. She also said the watchdog will be looking closely at the nature of the partnership and the level of “influence and alignment of incentives” between partners.

Meanwhile, the U.K. regulator is urging AI giants to follow the seven development principles it set out last fall to steer market developments onto responsible rails where competition and consumer protection are baked in. The short version of what it wants to see is: accountability, access, diversity, choice, flexibility, fair dealing, and transparency.

“We’re committed to applying the principles we have developed and to using all legal powers at our disposal — now and in the future — to ensure that this transformational and structurally critical technology delivers on its promise,” Cardell said in a statement.

Microsoft and OpenAI tie-up faces ‘relevant merger’ scrutiny by UK regulator CMA

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