On July 23, 2024, the competition authorities of the EU, the UK, and the U.S. issued a joint statement on competition in generative artificial intelligence (AI) foundation models and AI products (Joint Statement). Since the emergence of generative AI, each of the authorities has been individually ramping up its work in order to understand better the potential risks to competition that AI may pose. The Joint Statement may herald a more joined-up global approach with respect to scrutiny of competition in AI.
In recent years, competition authorities across the world have been scrutinizing AI in order to grasp the potential risks to competition. For example:
- The UK Competition and Markets Authority (CMA) set out its preliminary views in an initial report on AI foundation models published in September 2023 (see our Sidley Update here), with an update paper published in April 2024 (see our Sidley Update here). In the next phase of its review, the CMA will examine AI accelerator chips. A further update to the CMA’s report is expected in autumn 2024.
- The European Commission (EC) launched evidence-gathering “calls for contributions” on competition in virtual worlds and generative AI in January 2024 and held a workshop in June 2024. The EU Commissioner for Competition confirmed that requests for information have been sent to several key players as the EC continues to gather information on competitive dynamics in the AI industry.
- National competition authorities in the EU, including the Austrian, French, Hungarian, and Portuguese authorities, have published papers or launched market analyses regarding the effects of generative AI.
- In the U.S., House and Senate committees have already held more than 75 AI-focused hearings over the past five years, covering a broad scope of AI-related topics. In February 2024, the House announced that it would set up a new bipartisan task force on AI.
In the Joint Statement, four major global competition authorities — the EC, CMA, U.S. Federal Trade Commission (FTC), and U.S. Department of Justice (DOJ) — signal their intention to share understandings of the key issues and commit to using their respective powers to tackle any competitive threats.
In an attempt to avoid making what the competition authorities perceive to be the mistakes of the past, jurisdictions across the world are now experiencing something of a legislative frenzy to equip competition authorities with new tools to regulate digital markets and AI.
The Joint Statement highlights that the competition authorities in the U.S., the EU, and the UK will continue to focus on AI even before any new tools are adopted and come into force, demonstrating that the authorities are keen to use their existing powers to address any potential adverse effects on competition posed by AI before they become entrenched or irreversible.
With respect to AI foundation models, the authorities highlight a number of potential risks, including (i) concentrated control of key inputs, such as access to data, chips, computing power, and talent; (ii) entrenchment or extension of market power in AI-related markets; and (iii) entry into partnerships, financial investments, or other connections among firms related to the development of generative AI. They note that what is key will be focusing on how the emerging AI business models drive incentives and ultimately behavior.
To counter the competitive threats posed by the evolving AI landscape, the authorities endorse three key principles to mitigate risk and foster innovation, namely (i) fair dealing, (ii) interoperability, and (iii) choice.
Beyond generative AI, the authorities highlight the risk that algorithms may allow competitors to share competitively sensitive information, fix prices, or otherwise collude. They also note that algorithms may enable firms to undermine competition through unfair price discrimination or exclusion. In addition, consumer risks are on the authorities’ radar, with the Joint Statement noting that AI can “turbocharge” deceptive and unfair practices that can harm consumers.
It is clear from the Joint Statement that AI remains a hot topic, one that has united major competition authorities to work together to tackle the cross-border and cutting-edge challenges that AI poses. In light of this increased scrutiny, it is crucial that companies have a good awareness of how AI is used in their supply chains and a full understanding of any AI partnerships or investments, then implement safeguards around information flows to ensure that there are no unintentional exchanges of competitively sensitive information.
On July 16, 2024, Sidley hosted a webinar as part of its AI series on Key Issues, Challenges, and Considerations in Global Antitrust and Government Strategies, in which a number of the topics above were discussed. A recording of the webinar can be found here.
Thank you to Anna Kubinska, trainee for Sidley's Antitrust and Competition practice group, for her significant contribution to this Update.
