Watchdog turns spotlight on three potential risks to AI tech competition - Alan Davis

The CMA’s first concern is that the businesses which control the main inputs for developing foundation models, such as computing power, data, or expertise, could prevent competitors from accessing those inputs.

Restricting access to data that would allow competitors to build their own foundation models could ultimately reduce choice for consumers using AI, with traffic diverted towards a small number of larger technology firms, says the CMA.

The second identified risk may occur if technology businesses exploit their existing market positions to limit business or consumer choice of AI services. Business and consumer users should be able to choose the foundation model service they use. However, as the existing models are already integrated with certain technologies, such as mobile phones and preferred search engines, users may find their choices restricted.

Finally, the CMA is concerned that partnerships involving some of the main participants in AI innovation could entrench existing positions of market power. As an example, it cited the potential for strategic investments made by firms into leading suppliers of AI foundation models to limit access points or routes to market.

Its update report identifies an “interconnected web” of over 90 partnerships and strategic investments involving a number of large firms, posing a potential risk to competition by limiting consumer options for AI use. However, the CMA does acknowledge that such partnerships may potentially lead to “pro-competitive benefits” and therefore “each partnership must be assessed on its individual facts and merits”.

The paper describes six AI principles formulated by the CMA. It explains how the three areas of competition risk perceived by the CMA may be mitigated if firms align their business practices with the AI principles of access, diversity, choice, and fair dealing. The principles of transparency and accountability, on the other hand, are particularly relevant to AI consumer protections issues, according to the CMA.

The CMA is also considering issuing proactive consumer law guidance to firms active in AI-related markets if it identifies uncertainty or particular issues that need clarification.

CMA chief executive, Sarah Cardell, said that the authority is “keeping very close watch on current and emerging partnerships” to understand any impact on competition. CMA action may include the use of merger control powers to assess whether, and in what circumstances, any arrangements fall within the merger control rules and whether they raise any competition concerns.

The transformative Digital Markets, Competition and Consumers Bill – once enacted – will substantially strengthen the CMA’s powers to intervene and promote competition in digital markets and to enforce consumer protection laws. The CMA will continue its AI foundational models work throughout 2024 with plans to publish a further update this autumn.

Alan Davis, Partner and Head of Competition, EU & Trade at Pinsent Masons