The emergence of Artificial Intelligence since the launch of LLM models is likely to present certain challenges to competition authorities across various jurisdictions. Major existing digital players are driving the amazing growth of AI with its huge potential benefits for consumers, industries and governments. At the same time, this is raising potential issues under competition law. It is reassuring to see that major competition authorities have undertaken studies to examine the evolving trends in AI industry and where potential competition law questions could arise.
In April, the Indian Government announced the selection of Bengaluru based Sarvam to develop India's first home grown AI Large Language Model (LLM); the model is expected to be ready in six months. This is part of the Government's multi-dimensional plan to foster the growth of AI in India including foundational LLMs, compute capacity, large data sets, and AI talent. Countries across the globe are making similar efforts. For instance the European Commission recently put out a report outlining the EU's integrated strategy to establish Europe as a “leading AI continent'. The global race is on, currently led by the US and China.
AI is often referred to as the cornerstone of the fourth Industrial Revolution that is expected to reshape the landscape of industries, finance, governance and in fact society as a whole. AI offers unparalleled efficiency, innovation and insights.
On the other hand AI throws up a worrying lot of potential risks such as entrenched bias, ethical concerns, deep fakes and worsening inequalities. Naturally therefore there is a call for regulation, at least calibrated regulation. One area of heightened regulatory worry is the inter-relationship between AI and competition / antitrust law. This has engaged the attention of competition agencies and governments across countries; the effort has been to identify potential areas of concern and search for remedial measures.
Recently leading competition authorities viz of the US, EU and UK put out a joint statement on competition in generative AI foundation models and AI products. The joint statement while acknowledging AI as a technological inflection point with the potential for unparalleled benefits to society identified certain areas where growing AI power can hinder competition; the joint statement has suggested principles for protecting competition. Individual authorities from these jurisdictions have undertaken studies into the possible damaging effects on competition and put out informative reports in this respect. This includes the US FTC's report on partnerships between cloud service providers and AI developers, the UK CMA's report on foundation models and the EC's report on competition in generative AI and virtual worlds. The broad observations and conclusions from these several reports are along similar lines and are usefully summarized in the EC's above report.
These reports note that the development and deployment of AI call for huge amounts of costly resources – including in the form of supercomputing infrastructure such as GPUs and cloud capacity. Another critical input is vast amounts of high quality data needed for development and ongoing training of the models. The availability of AI talent and knowhow is a major constraint. Access to these inputs requires serious money. The reports observe that such resources are not within the reach of most AI companies. This puts the large incumbent big tech players in a very advantageous position relative to other companies. The competition law question is whether the possession of these facilities can be leveraged to thwart competition in both upstream and downstream markets by denying access to certain parties or by giving to selected players either exclusivity or preferential treatment.
An incumbent digital major may for example tie up an exclusive licensing agreement for securing high quality data from an upstream source, which may make the data unavailable to competitors. Another cited example is of a data player active both in AI development and cloud capacity denying access to its cloud to other developers or deployers or providing access preferentially to certain parties.
The EU study expresses similar concerns in regard also to the downstream markets where AI applications are deployed and commercialized for example by having exclusivity conditions or through tying or bundling restrictions or self preferencing or lock-in strategies.
These competition authorities have in particular taken note of acquisitions or investments by large digital players in smaller AI developers. Such arrangements do have the beneficial effect of providing to the small AI players access in both the upstream and downstream markets and facilitating both the development and distribution of AI systems. These also provide emerging developers much needed capital as well as inputs such as large data sets and computing power. Additionally it provides them distribution channels and access to customers. To the large digital player it provides intellectual property and skilled manpower. In that sense this is a win-win situation. However, the downside that competition authorities see with such arrangements is that these may create high levels of concentration and foreclose access of competitors to critical paths to development or deployment.
The competition authorities have examined from the merger control perspective some high profile investments and partnerships such as between Microsoft and Inflection wherein (similar to other such deals) Microsoft inter alia obtained a license for Inflection's IPR and acquired practically all the staff of Inflection including its two founders. The question that arises is whether this deal amounts to a merger under competition law and if so whether it would adversely affect competition going forward. The EC's view was that the deal amounted to a structural shift in the market (and hence a merger) because Inflection's position in the relevant markets for generative AI foundation models and chatbots stood transferred to Microsoft. However, the EC has been prohibited by the European Court of Justice from examining merger cases which fall below the EU's merger revenue threshold.
Looking at the rapid emergence of AI in India, supported by the government, the Competition Commission of India will sooner or later be confronted with cases in AI markets both on the merger front and antitrust complaints such as those mentioned above and face the same kind of issues that have been engaging overseas authorities. This will require a deeper understanding of these markets and a nuanced and balanced approach that avoids an overreach or over regulation which may thwart innovation or improved services and on the other hand not allow competition in these markets to be chilled. Toward this end the Commission has commissioned a study which inter alia aims to help understand key AI systems and markets and emerging and potential competition issues therein. However, the above reports released by other competition authorities of the US, EU and UK too can provide valuable insights into emerging competition issues in AI.
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