CMA seeks ‘significant’ tech firm engagement to protect competition and consumers in AI markets

The CMA is inviting inputs from leading AI developers in the UK, US and elsewhere to help develop the regulatory framework for emerging AI markets. The regulator’s “collaborative approach” was announced on 18 September 2023 alongside the publication of a 129-page report (PDF/2.4MB) on competition in the UK’s AI market and its proposed principles to ensure consumer protection and healthy competition in the development and use of AI. The CMA began its examination of competition and consumer protection in the UK’s AI foundation models market earlier this year.

The report and proposed principles specifically relate to ‘foundation models’ (FMs), which include large language models and generative AI, like chatbots and image generators. While recognising the benefits FMs could bring for people, businesses and the economy, the report emphasised that competition is vital to see the full benefits that FMs have to offer and warned that weak competition would lead to harm.

The CMA’s report said that if the development and use of FMs works well, it could lead to benefits such as new and better products and services, easier access to information, scientific and health breakthroughs, and lower prices. However, “if competition is weak or developers fail to heed consumer protection law, people and businesses could be harmed,” it said. ”People could be exposed to significant levels of false and misleading information and AI-enabled fraud. In the longer term, a handful of firms could use FMs to gain or entrench positions of market power and fail to offer the best products and services and/or charge high prices.”

The CMA has proposed seven principles that aim to ensure ongoing development and use of FMs is done in a way that preserves effective competition and minimises the potential for consumer harm. These principles cover accountability, access, diversity, choice, flexibility, fair dealing, and transparency.

The ‘access’ principle, for example, aims to ensure ongoing ready access to key inputs such as data, computing power, expertise, and capital; and that successful FM developers do not gain an “entrenched and disproportionate” early mover advantage that could later create barriers to new market entry.  Likewise, the ‘fair dealing’ principle aims to prevent anti-competitive conduct, such as self-preferencing, tying or bundling, especially where this arises from vertical integration.

The ’transparency’ principle, for example, is focused more on consumer protection, requiring that consumers and businesses are informed about the risks and limitations of FM-generated content so they can make informed choices.

Other areas of concern the guiding principles seek to address include undue restrictions on firms’ ability to switch between or use multiple FM providers, the development of ecosystems that unduly restrict choice and interoperability, and the risk of consumers receiving false or misleading content from FM services that may impact their decision-making.

In the report, CMA also unveiled its plan to develop the principles further by seeking views in the coming months through a “significant programme of engagement” with a wide range of stakeholders across the UK and internationally - including large technology and AI companies - so that the principles can best support competition and protect consumers as AI evolves.

The principles are important because they will inform the CMA’s approach when it assumes new responsibilities under the Digital Markets, Competition and Consumer Bill currently going through Parliament. The bill envisages a more specific competition law regime for the regulation of digital markets led by the Digital Markets Unit within the CMA.

Explaining the rationale behind the principles and the engagement programme, chief executive of the CMA Sarah Cardell said that “in rapidly developing markets like these, it’s critical we put ourselves at the forefront of that thinking, rather than waiting for problems to emerge and only then stepping in with corrective measures.”

“While I hope that our collaborative approach will help realise the maximum potential of this new technology, we are ready to intervene where necessary,” she added.

As the UK’s primary competition and consumer authority, the CMA has focused on potential competition and consumer protection issues that may arise from developments in FM services. FMs may also raise other important questions in areas such as copyright and intellectual property, online safety, data protection, security and more – but these are outside the scope of the CMA’s initial review.

An update on the CMA’s thinking, including how the principles have been received and adopted, will be published in early 2024.