The UK’s competition watchdog has waded into the row over the dominance of US tech giants in the artificial intelligence market, insisting the “harmful” situation is “to the detriment of fair, open and effective competition”.
The move follows concerns that UK hopes of being a world leader in generative AI have all but evaporated already, with Microsoft-backed Open AI and Meta AI solidifying their tech dominance by capturing 56% of the market.
And, in January, the House of Lords Communications & Digital Committee warned that the Government’s obsession with the “AI apocalypse” could see the UK miss out on the tech goldrush and, much like the Internet revolution before it, pave the way for overseas tech giants to dominate the market, leaving British firms out in the cold.
Now, a new Competition & Markets Authority (CMA) report confirms 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, the CMA warned.
Chief executive Sarah Cardell said the regulator’s investigation shows current market conditions point toward a potential lock-out for smaller companies operating in the space.
She added: “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.”
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 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 the CMA has been monitoring the situation, and now believes that the concentration of power in just a few firms could harm competition, adding that the regulator sees three main risks emerging.
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.
Second, 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.
And, finally, partnerships involving key players could entrench existing positions of market power through the value chain.
Cardell said the CMA is keeping a close eye 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.
Cardell concluded: “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, this will harm businesses and consumers, by reducing choice and quality and increasing price.”
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