CMA seeks views on AI partnerships and other arrangements

April 24, 2024

The Competition and Markets Authority has opened invitations to comment (ITCs) regarding certain AI partnerships.

They are asking for comments about the partnerships between:

  • Microsoft and Mistral AI,
  • Amazon and Anthropic,
  • as well as Microsoft’s hiring of former employees and related arrangements with Inflection AI

and if they fall within UK merger rules and the impact that these arrangements could have on competition in the UK. 

The ITCs are being issued ahead of launching formal Phase 1 reviews. The period before launching a formal Phase 1 review is known as pre-notification. During pre-notification, the CMA gathers the information it will need to carry out a formal Phase 1 review, including information from merger parties about their UK activities, data and internal documents. Once the CMA has sufficient information in relation to a transaction it will begin its formal Phase 1 review. The amount of time it takes to gather this information varies from case to case depending on the complexity of the issues and how quickly the parties provide the required information.

The CMA’s announcement follows its recent report which outlines three key interlinked risks to open, fair and effective competition in the markets for AI Foundation Models (FMs) – specifically, concerns that partnerships involving key players could be exacerbating existing positions of market power through the FMs value chain.

In its report, the CMA identified an interconnected web of over 90 partnerships and strategic investments involving the same firms. Though these partnerships have the potential to bring pro-competitive benefits, the CMA remains vigilant against the possibility that incumbent technology firms could use partnerships and investments to shield themselves from competition.

As outlined in the report, not all partnerships or arrangements will fall within the merger rules. Where the CMA considers that a partnership and/or arrangement may fall within UK merger rules and may give rise to competition concerns in the UK, the CMA may open an investigation to assess these.

The CMA is also considering feedback received earlier this year on Microsoft’s partnership with OpenAI and is currently waiting for information it has requested from the firms. The CMA has not yet opened a formal Phase 1 review of the deal.

Overseas regulators are also examining partnerships and arrangements in AI markets within their own jurisdictions. For example:

  • The European Commission is assessing competition in “virtual worlds” and generative AI and has called for information from several large digital players to “examine the market dynamics” of partnerships in this space.
  • The Federal Trade Commission has an ongoing inquiry into generative AI investments by technology companies, to assess whether these “investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition”.

The CMA requests comments by 9 May 2024.