| COMPETITION & STATE AID |
| Competition |
| Joint Statement on Competition
in Generative AI Foundation Models and AI Products (seehere) |
On 23 July 2024, competition authorities
for the EU, UK, and US released a Joint Statement on Competition in
Generative AI Foundation Models and AI products*.
Backdrop / objectives. The Joint Statement
responds to the transformational potential of AI, including
so-called foundation models.** It notes that AI is one of the most
significant technological developments in recent decades, which can
introduce new means of competing, catalyzing opportunity,
innovation and growth. Given this, the authorities commit to
safeguarding against tactics that could undermine fair competition,
in order to ensure the fair treatment of consumers and
businesses.
AI risks. The authorities seek to address AI risks
before they become entrenched or irreversible harms, including the
following three main risks in particular:
- Concentrated control of critical inputs: Some
key components (e.g. specialized chips) are vital to developing
foundation models. This could possibly create bottlenecks across
the layers of technologies and components that make up an AI system
(so-called AI stack), which could impact the development and
innovation of these tools.
- Deepening market power in AI-related markets:
Some digital firms already possess strong advantages and
substantial market power at multiple levels related to the AI
stack. These advantages can allow those firms to extend or entrench
their positions on the market, which could harm future
competition.
- Collaboration among key players: Arrangements
between firms developing AI (e.g., partnerships, financial
investments) can be used to undermine competitive threats and steer
market outcomes at the expense of the public.
Safeguards. The Joint Statement then identifies
three main principles to protect competition and foster innovation
in the AI ecosystem:
- Fair dealing: Firms with market power should
engage in fair-dealing and not exclusionary tactics that can
undermine competition and discourage innovation.
- Interoperability: Fostering interoperability
will enhance competition and innovation in the AI field. If
interoperability is claimed to harm privacy and security, this will
be carefully examined.
- Choice: Choice among diverse AI products
should be ensured through competitive processes, such as by
scrutinizing how companies may employ "lock-in"
mechanisms to prevent companies or individuals from seeking other
options.
The Joint Statement also identified other competition risks
associated with AI, for example, the risk of using algorithms to
enable competitors to exchange competitively sensitive information.
The authorities further committed to monitor and address any
specific risk that may arise in connection with other AI
developments and applications. * Joint Statement on Competition in Generative
AI Foundation Models and AI Products presented by Margrethe
Vestager, Executive Vice-President and Competition Commissioner;
Sarah Cardell, Chief Executive Officer, U.K. Competition and
Markets Authority; Jonathan Kanter, Assistant Attorney General,
U.S. Department of Justice; and Lina M. Khan, Chair, U.S. Federal
Trade Commission.
** A foundation model (also known as large AI model) is a machine
learning or deep learning model that is trained on broad data such
that it can be applied across a wide range of use cases. Foundation
models have transformed AI, driving well-known generative AI
applications like ChatGPT.
|
| State Aid |
| European Commission publishes
Staff Working Document on Foreign Subsidies Regulation (see here) |
On 26 July 2024, the European Commission
released a Staff Working Document (SWD) that seeks to clarify how
it will apply and make assessments under the Foreign Subsidies Regulation (FSR)
(Regulation (EU) 2022/2560 of 14
December 2022 on foreign subsidies distorting the internal market),
which started to apply on 12 July 2023.
To recall, in the Commission's view, the FSR will help level
the playing field in relation to companies that receive subsidies
from outside the EU, given the Commission's power to
investigate such aid with the aim of ensuring that it does not
create distortions in the EU. If the Commission deems that such
distortions arise, the Commission can deploy a wide range of
redressive measures, which include the repayment of a foreign
subsidy, the prohibition of an M&A transaction, or the
rejection of a tender in a public procurement. (see also Jones Day EU Emergency Response Update No. 110
of 23 November 2023).
The SWD sets outs, in particular, initial clarifications on the
following:
- Assessment of the existence of a distortion
caused by a foreign subsidy on the internal market in various
contexts (e.g., distortions caused by unlimited
guarantees, which can take many forms and may go beyond an
explicit statement or legal act referring to the undertaking
concerned, for instance, where an undertaking benefitting from an
unlimited guarantee may receive a loan from a private bank that
prima facie appears to be on market terms, but whose
conditions actually reflect the existence of such guarantee);
- Application of the balancing test to weigh the
positive and negative effects of foreign subsidies distorting the
internal market (e.g., the Commission's balancing assessment
will include information received on possible positive
effects, which may be provided by all relevant
stakeholders (the undertakings under investigation, the EU Member
States, and other third parties)).
Looking ahead. The SWD's initial
clarifications will be further developed through case practice and
EU case law. The Commission will also publish guidelines on
applying certain FSR provisions at the latest by 12 January
2026. |
| European Commission approves
further schemes under Temporary Crisis and Transition Framework to
support economy in context of Russia's invasion of Ukraine and
accelerating green transition and reducing fuel dependencies
(see here) |
The Commission approved additional measures under the
State aid Temporary Crisis and Transition Framework (TCTF) to
support the economy in the context of Russia's invasion of
Ukraine and in sectors key to accelerating the green transition and
reducing fuel dependencies (as most lately amended on 2 May 2024
and 20 November 2023).
Among the most recently approved State aid schemes under the TCTF
(up to 26 August 2024):
- Amendments to an existing Italian scheme supporting companies
active in Southern Italy in the context of Russia's war against
Ukraine, with modifications to the existing scheme such as a budget
increase by €2.9 billion, bringing the overall budget from
€11.4 billion to €14.3 billion.
- €158 million Dutch scheme to support the investments for
the production of equipment necessary to foster the transition to a
netzero economy, in line with the Green Deal Industrial Plan.
- €10.82 billion French scheme to support offshore wind
energy to foster the transition to a net-zero economy.
- €50 million Austrian scheme to support primary
agricultural producers in the context of Russia's war against
Ukraine
- €400 million Italian scheme to support investments in the
decarbonisation of industrial production processes to foster the
transition towards a net-zero economy, in line with the Green Deal
Industrial Plan.
- Amendment to an existing Romanian scheme, including an overall
€54.4 million (RON 270.7 million) budget increase, to support
tomato and garlic producers in the context of Russia's war
against Ukraine.
- -€200 million Finnish scheme to support the production of
renewable fuels of non-biological origin and the deployment of
energy storage to foster the transition towards a net-zero economy,
in line with the Green Deal Industrial Plan.
- €1.5 billion French scheme to support sustainable
biomethane production to foster the transition to a net-zero
economy.
- €25 million Slovak scheme to support livestock producers
in the context of Russia's war against Ukraine.
- €750 million Dutch State aid scheme to support the
decarbonisation of industrial processes to foster the transition to
a net-zero economy.
- €1.2 billion Spanish State aid scheme to support
investments in the production of renewable hydrogen to foster the
transition to a netzero economy.
- Amendments to an existing Dutch scheme, including a €50
million budget increase, to support agricultural producers in the
context of Russia's war against Ukraine.
|
| TRADE / EXPORT
CONTROLS |
| EU and Singapore issue Joint
Statement on concluding negotiations for landmark Digital
Trade Agreement (see here) |
On 25 July 2024, the EU and Singapore
(the Parties) issued a Joint Statement upon concluding negotiations
for a Digital Trade Agreement* (DTA), which will benefit
businesses and consumers that engage in digital trade.**
As noted by the Commission, this DTA is "the first EU
agreement of its kind, reflecting the EU's aspiration to be a
global standard-setter for digital trade rules and cross-border
data flows."
The DTA reflects the strategic significance of digital trade and
Southeast Asia's pivotal role, given the considerable growth of
its digital economy. In this respect, over half of the total trade
in services between the EU and Singapore is already digitally
delivered and represented 55% of total EUSingapore trade in 2022
(worth €43 billion).
The DTA is expected to further bolster EU-Singapore trade
relations, notably by:
- facilitating digitally-enabled trade in goods and
services (e.g. through the use of electronic
contracts and signatures; and a reaffirmed commitment to
develop or maintain single window customs systems
to facilitate a single, electronic submission of all information
required by customs and other legislation for the export, import,
and transit of goods);
- ensuring cross-border data flows without unjustified
barriers (e.g. not prohibiting the transfer of data into
the territory of a Party); and
- reinforcing trust in digital trade (e.g.,
protecting personal data; limiting spam).
Alongside the DTA negotiations, the EU and Singapore also held the
second Trade Committee meeting under the EU-Singapore Free Trade Agreement (EUSFTA),
which entered into force on 21 November 2019. The DTA will serve as
a key complement to the EUSFTA by reinforcing this trade connection
and providing further opportunities for growth.
Next steps. The EU and Singapore will now pursue their respective
approval processes in view of formally signing and concluding the
DTA. The DTA will become binding on the Parties under international
law only after completion by each Party of its internal legal
procedures necessary for the entry into force of the
agreement.
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