UK: CMA Launches Review Into AI Market

On 4 May 2023, the CMA launched an initial review of the competition and consumer protection principles that can best guide the ongoing development of foundation models and their use with a view to:

1. ensuring that the CMA has sufficient information to take informed decisions in relation to its work;
2. create an early understanding of the market for foundation models and how their use could evolve;
3. understand what opportunities and risks these scenarios could bring for competition and consumer protection; and
4. understand what competition and consumer protection principles will therefore best guide the development of these markets going forward.

Foundation models are a type of artificial intelligence ("AI") technology that are trained on vast amounts of data that can be adapted to a wide range of tasks and operations. Foundation model applications include chatbots, writing assistant and code writing, and generation of images for artistic or commercial purposes.

The focus of the initial review is on the following three themes:

1. competition and barriers to entry in the development of foundation models;
2. the impact foundation models may have on competition in other markets; and
3. consumer protection.

The CMA recognises there are other important questions raised by foundation models – copyright and intellectual property, online safety, data protection, security and more – but these are not included in the scope of the review.

The CMA has asked for submissions from stakeholders by 2 June 2023, and is aiming to publish a report setting out its findings in September 2023. The CMA will use the findings of the initial review in a number of ways, to:

1. inform the CMA's implementation of the government's approach to AI regulation, and any recommendations that the CMA may make to the government (including the Office for AI), other regulators (including the DRCF), as well as any guidance to suppliers, developers, businesses and end users.
2. enable the CMA to decide whether further consideration of an issue is or is not appropriate, thereby facilitating the efficient and effective use of the resources of the CMA and other persons.

In March 2023, the UK Government published its white paper on AI (which can be found here). The CMA has been engaging with the government on its work in this area, and will continue to also work with other regulators in the Digital Regulation Cooperation Forum ("DRCF"). The DRCF was established to ensure a greater level of cooperation between the UK regulators and CMA, given the unique challenges posed by regulation of online platforms. To that end various UK regulators including the CMA (and its DMU) have already been giving a lot of thought to AI and have published widely. Indeed, foundation models were prioritised in the CMA's 2022 scan of important future technological developments. The review comes at a time where regulators around the world are also increasing their scrutiny of the development of generative AI.

According to the CMA, in the past six months the capabilities and deployment of foundation models have accelerated dramatically. The goal is to help emergent and rapidly scaling AI technology develop in ways that result in open, competitive markets in the UK. Without clear pro-competitive conditions and clear consumer protections in place, such periods of development can be followed by increased concentration of market power and consumer dissatisfaction or harm.

Sarah Cardell, the chief executive of the CMA has said that it is "crucial that the potential benefits of this transformative technology are readily accessible to UK businesses and consumers while people remain protected from issues like false or misleading information. Our goal is to help this new, rapidly scaling technology develop in ways that ensure open, competitive markets and effective consumer protection."

The review is at a very early stage, and we will provide further updates as it evolves. It could lead to more in-depth reviews of specific issues, or market investigations if any concerns are identified. The findings are likely to inform the work of the CMA in areas such as competition enforcement and merger control.