The Competition and Markets Authority is already active in the AI space. You know something has reached peak ubiquity when the CMA is looking to ensure it isn’t disrupting the market!

The CMA launched an initial review in May 2023 and then in September 2023 published a report. This contains principles to guide the development and deployment of “AI foundation models” to promote competition and consumer protection.

There have been further developments from the CMA in April 2024.

CMA update paper

First, it published an update. It noted that, since September 2023, the sector continues to grow at pace with both consumers and businesses increasingly using generative AI: 31% of adults and 79% of 13–17-year-olds in the UK have used some form of generative AI tool. 46% of larger businesses (250+ staff) are using AI. 

The paper identifies three risks to fair, open and effective competition posed by AI foundation models.

1. Key players might shield themselves from competition by restricting access to key components of AI, such as compute, data or expertise.
2. Key players might restrict user choice of AI based on how that AI is deployed, such as in mobile devices, search engines or productivity software
3. Partnerships involving key players could reinforce or extend existing positions of market power by consolidating or partnering in the supply chain

 The CMA has said it will monitor this sector to identify and mitigate risks and will provide a further update in Autumn 2024. One of the measures it proposes is to increase its use of merger control. You can read the update paper here (PDF).

Phase 1 review of Microsoft & Amazon

It should come as no surprise that a week after publishing its update report, it has indicated that it is now looking into some of the partnerships it mentioned in the report. It has initiated a “Phase 1 Review” on the partnerships between Microsoft / Mistral AI and Amazon / Anthropic and Microsoft’s hiring of former employees and related arrangements with Inflection AI. This means it is inviting comments. Following this Phase 1 review, the CMA might conclude everything is fine. Or it might conclude there is a “substantial lessening of competition”, in which case can refer it for an in-depth Phase 2 review. Before that, the relevant parties can offer undertakings to try to resolve the CMA’s concerns to avoid Phase 2. The CMA makes it clear that, at this early stage, it has not yet formed its own conclusions.

If you have views you should submit them by 9 May.

If you’re using AI, carry on as before but beware of bumps down the road. Naturally, you should read the terms of use and ensure any input you provide is protected and remains confidential.

If you need advice, contact me at +44 20 3824 9748 or fjennings@hcrlaw.com.