The UK's competition watchdog has expressed 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 web of more than 90 partnerships and strategic investments.
These firms, which include Apple, Microsoft, Google, Meta, Amazon, and Nvidia, have a vested interest in shaping the AI space to their own interests to protect existing market power and extend it into new areas.
Sarah Cardell, chief executive at the CMA, said a probe by the competition authority shows current market conditions point toward a potential lock-out for smaller companies operating in the space.
"When we started this work, we were curious. Now, with a deeper understanding and having watched developments very closely, we have real concerns," she said.
"The essential challenge we face is how to harness this immensely exciting technology for the benefit of all, while safeguarding against potential exploitation of market power and unintended consequences."
The report follows an initial review published in September 2023, after which the CMA proposed a set of underlying principles aimed at supporting innovation while guiding the markets.
These principles include ready access to key inputs; sustained diversity of models and model types; sufficient choice for businesses and consumers to decide how to use foundation models; fair dealing; transparency; and developer and deployer accountability for outputs.
Since then, Cardell said it's been monitoring the situation, and now believes that the concentration of power in just a few firms could harm competition.
"Our update report will also reflect a marked increase in our concerns about the directional trend of these developments," Cardell said.
"Specifically, we believe the growing presence across the foundation models value chain of a small number of incumbent technology firms, which already hold positions of market power in many of today’s most important digital markets, could profoundly shape these new markets to the detriment of fair, open and effective competition, ultimately harming businesses and consumers, for example by reducing choice and quality and increasing price."
The CMA said it sees three main risks emerging in the AI industry in the coming years.
The first is that large firms controlling the critical inputs for foundation model development could have the ability - and the incentive - to restrict access to those inputs to shield themselves from competition.
Incumbents could exploit their positions in consumer or business-facing markets to distort choice in foundation model services and restrict competition in foundation model deployment, the regulator warned.
Similarly, partnerships involving key players could entrench existing positions of market power through the value chain.
Cardell said the CMA is keeping a close watch on current and emerging partnerships and plans to step up its use of merger control.
Partnerships between major AI players have accelerated in recent months, and regulators in the UK, EU, and US have all raised concerns about whether or not these amount to mergers.
Microsoft, for example, has been subject to intense regulatory scrutiny over 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 firm in the future.
Douglas Dick, head of emerging technology risk at KPMG, said the consultancy welcomes any recommendations from the CMA on the topic of AI competition.
Developing a diverse, competitive marketplace will ultimately help both businesses and consumers in the long-term, he said.
“While AI has existed for many years, the acceleration of generative AI in the last 18 months has seen increased demand across industry,” Dick commented. “The diversity of the market is going to be key to driving innovation, reducing barriers to entry, and enabling ease of adoption.”
