CMA outlines growing concerns in markets for AI Foundation Model

As the legal sector sees an increase in usage of generative AI such as ChatGPT, the Competition and Markets Authority(CMA) in the UK have expressed ‘concerns’ with the utilization of more diverse Foundation Model AI in a rapidly accelerating market. 

The authority has outlined risks to effective competition in AI Foundation Models(FM) and has set out plans for further action in the market. One such concern is the speed at which FM AI is being rolled out, and have described the production of new technology as ‘whirlwind’.

CMA bosses have said ‘when we started this work we were curious, now we have real concerns’. Several firms have said lawyers need to ‘keep up’ with AI tools, with some going so far as to imply ’embrace AI or risk being replaced’.

Paul Sams, Head of Property at Dutton Gregory Solicitors, who says law firms that aren’t using it, are ‘missing a trick’.

Legal-tech company Lawhive has raised £9.5 million in Seed funding, advancing its mission to streamline their services, one such venture combining AI with human lawyers.

The move from the Competition and Markets Authority (CMA) follows its initial report on AI Foundation Models (FMs) last year. The report proposed a set of principles to help sustain innovation and guide these markets toward positive outcomes for businesses, consumers, and the wider economy.

They suggest that powerful incumbents could exploit their positions in consumer or business facing markets to distort choice in FM services and restrict competition in deployment.

Speaking at a conference in Washington DC, Chief Executive Officer Sarah Cardell shared highlights from the CMA’s update to its FMs work. In her remarks, Sarah Cardell describes the transformative promise of FMs as a potential “paradigm shift” for societies and economies. She also outlines a range of fast-moving developments across FM markets which, underpinned by the CMA’s deepening understanding of the FM ecosystem, have prompted a marked increase in concern.

Cardell said:

“When we started this work, we were curious. Now, with a deeper understanding and having watched developments very closely, we have real concerns.

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.

We’re committed to applying the principles we have developed, and to using all legal powers at our disposal – now and in the future – to ensure that this transformational and structurally critical technology delivers on its promise.”

The speech highlights the growing presence across FM markets of a small number of incumbent technology firms which already hold positions of market power in many of today’s most important digital markets. The firms have strong positions in both the development of FMs (including through the supply of critical inputs like compute, data, and talent), and in the deployment of models, through key access points or routes to market, like apps and platforms.

Reportedly there is concern that some firms may have both the ability and the incentive to shape these markets in their own interests – both to protect existing market power and to extend it into new areas. This could profoundly impact fair, open, and effective competition in FM-related markets, ultimately harming businesses and consumers, for example through reduced choice, lower quality, and higher prices, as well as stunting the flow of potentially unprecedented innovation and wider economic benefits from AI.

The authority’s update paper, to be published today, identifies an “interconnected web” of over 90 partnerships and strategic investments involving the same firms: Google, Apple, Microsoft, Meta, Amazon, and Nvidia (which is the leading supplier of AI accelerator chips). The CMA recognises the huge wealth of resources, expertise and innovation capability these large firms can bring to bear, and the role they will likely have in FM markets, as well as the fact that partnerships and arrangements of this kind can play a pro-competitive role in the technology ecosystem.

However, the CMA cautions that powerful partnerships and integrated firms should not reduce rival firms’ ability to compete, nor should they be used to insulate powerful firms from competition. Maintaining diversity and choice in the market is also vital for safeguarding against the risk of over-dependence on a handful of major firms – particularly considering the breadth of potential use for FMs, across all sectors of the economy, such as finance, healthcare, education, defence, transport, and retail. The benefits of AI for businesses and consumers are much more likely to be realised in a world where the most powerful technology firms are subject to fair, open, and effective competition – both from potential challengers and between themselves – rather than one where they are able to leverage FMs to further entrench and extend their existing positions of power in digital markets.

Sarah Cardell notes that the CMA is “keeping very close watch on current and emerging partnerships”. This includes use of merger control powers to assess whether, and in what circumstances, these kinds of arrangements fall within the merger rules and whether they raise competition concerns – particularly given the complex and opaque nature of some partnerships and arrangements.

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