The UK's competition watchdog has raised serious concerns about the way Big Tech is dominating the burgeoning AI market.
A new report from the Competition and Markets Authority (CMA) warned that the sector is controlled by just six companies, operating through a network of more than 90 strategic partnerships and investments.
These companies, which include Apple, Microsoft, Google, Meta, Amazon and Nvidia, have a vested interest in adapting the AI space to their own interests to protect existing market power and extend it into new areas.
Sarah Cardell, chief executive of the CMA, said research by the competition authority shows current market conditions point towards a potential blockage for smaller companies operating in the space.
“When we started this work, we were curious. Now, with a deeper understanding and having watched events very closely, we have real concerns,” he said.
“The essential challenge we face is how to harness this immensely exciting technology for the benefit of all, while protecting against potential exploitation of market power and unintended consequences.”
The report follows an initial review published in September 2023, following which the CMA proposed a set of underlying principles aimed at supporting innovation while guiding markets.
These principles include easy access to key inputs; sustained diversity of models and model types; sufficient options for businesses and consumers to decide how to use the basic models; fair agreement; transparency; and developer and implementer responsibility for results.
Since then, Cardell said he has been monitoring the situation and now believes the concentration of power in a few companies could harm competition.
“Our updated report will also reflect a marked increase in our concerns about the directional trend of these developments,” Cardell said.
“Specifically, we believe that the growing presence in the value chain of the basic models of a small number of established technology companies, which already occupy positions of market power in many of today's most important digital markets, could profoundly shape these new markets to the detriment of fairness, open and effective competition, which ultimately harms businesses and consumers, for example by reducing choice and quality and increasing prices.”
The CMA said it sees three main risks emerging in the AI industry in the coming years.
The first is that large companies that control the inputs critical to the development of the basic model could have the ability – and the incentive – to restrict access to those inputs to protect themselves from competition.
Incumbents could exploit their positions in consumer or business markets to distort choice in basic model services and restrict competition in the implementation of the basic model, the regulator warned.
Similarly, partnerships involving key players could entrench existing positions of market power across the value chain.
Cardell said the CMA is closely monitoring current and emerging partnerships and plans to step up the use of merger control.
Partnerships between major AI players have accelerated in recent months, with regulators in the UK, EU and US raising concerns over whether or not this amounts to mergers.
Microsoft, for example, has been subject to intense regulatory scrutiny for its relationship with OpenAI. A recent partnership with French AI startup Mistral also raised concerns among EU lawmakers, who questioned the scope of the deal and the level of influence Microsoft could exert over the Paris-based company in the future.
Douglas Dick, head of emerging technologies risk at KPMG, said the consultancy welcomes any recommendations from the CMA on the issue of AI competition.
Developing a diverse and competitive market will ultimately help both businesses and consumers in the long run, he said.
“While AI has been around for many years, the acceleration of generative AI over the past 18 months has led to increased demand across the industry,” Dick said. “Market diversity will be key to driving innovation, reducing barriers to entry and facilitating adoption.”
