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Digital developments in focus
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CMA sets out early thinking on the impact of AI Foundation Models on competition and consumers

Earlier this year, the UK Competition and Markets Authority announced the launch of an initial review into the impact of AI Foundation Models on consumers, businesses, and the economy. We covered the launch of the review in a previous blog post on The Lens.

The CMA has now published its report setting out its initial findings and several overarching principles that should guide the development and deployment of AI Foundation Models in the future. As part of its work to assess how AI will affect competition and consumers in the UK, the CMA has stated that it will continue to engage with a wide range of stakeholders including tech companies, consumer groups, government, and fellow regulators. An updated report on its views and any market developments will be published in early 2024.

In the initial report, published on 18 September 2023, the CMA set out its early thinking on Foundation Models (FMs). FMs are AI technology trained on large sets of data and which can be adapted to a wide range of tasks and operations. The CMA considered the market for the development and deployment of FMs, the impact of FMs on other markets, and the impact that the emergence of FMs might have on consumers.

Based on input from over 70 stakeholders, publicly available information, and the latest academic thinking on FMs, the CMA has developed the following principles to guide the development and deployment of FMs:

  • Accountability – FM developers and deployers should be accountable for outputs provided to consumers.
  • Ongoing access to key inputs necessary to compete in the FM market. This includes access to large data sets, computing power, expertise, and capital.
  • Sustained diversity of business models, including both open-source and closed-source FMs.
  • Sufficient choice for businesses so that they can access FMs in a variety of ways, including through partnerships or third party plug-ins.
  • Flexibility to enable consumers to switch and/or use multiple FMs easily, including the ability to "port" their data between services.
  • Fair dealing and restrictions on businesses engaging in anti-competitive conduct relating to the FM products - including self-preferencing and tying/bunding.
  • Transparency regarding the risks and limitations of FM-generated content to enable consumers to make informed choices.

The CMA emphasised that these are proposed principles that reflect its preliminary thinking only, and that it will continue with "the collaborative spirit of our work to date as we take it forward to the next stage." While the CMA's engagement and review of FMs continues, however, businesses should expect that any mergers or acquisitions involving AI technology/FMs will be scrutinised carefully. Firms with existing or potential FM technology should likewise be cautious to comply with competition law as future collaborations or agreements will likely pique the interest of the CMA and other regulators.

The CMA’s report and possible implications will be analysed in more detail in the next edition of our Competition & Regulatory newsletter.

There will be an important role for regulation as AI develops further. But as with all regulation, it needs to be proportionate and targeted at identified risks. Overly burdensome regulation may make it more difficult for competition and innovation to flourish, and at worst may lead to concentration and become a significant barrier to entry in its own right.


ai, competition, regulating digital