The Competition and Markets Authority (CMA) has identified three key interlinked risks to fair, effective and open competition in the AI Foundation Models (FMs) market.

This follows the CMA’s initial report on AI Foundation Models last year, which proposed a set of principles to help sustain innovation and guide these markets toward positive outcomes for businesses, consumers, and the wider economy.

While AI is a burgeoning sector in its own right, and offers many open source opportunities for rapid adoption across various industries, the CMA is largely concerned that the emerging technology is already being domineered by a select few of tech powerhouses already dominating the market.

At the beginning of their investigation into the rising AI marketplace, the CMA was curious – now, the markets watchdog is concerned.

In a speech given in Washington DC, CMA chief executive officer Sarah Cardell highlighted the growing presence across foundational model markets of a small number of incumbent technology firms which already hold market dominance in many of today’s diverse digital markets.

The firms already have established strongholds, be it in search engines, browsers, cloud services, data, and productivity software. This gives these established firms not only strong positions to develop FMs, but in the deployment of them as well.

The CMA is concerned 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 CMA’s update paper 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).

These major companies hoard a huge wealth of resources, expertise and innovation capability which can have a major role in FM markets. However, partnerships and arrangements of this kind can play a pro-competitive role in the technology ecosystem.

For fair market competition, the CMA has illuminated three key interlinked risks.

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First, the CMA is concerned that firms controlling critical inputs for developing FMs may restrict access to these in an effort to protect them from competition.

Powerful incumbents may further exploit their positions in consumer or business facing markets in order to distort choice in FM services and restrict competition in deployment.

Just as well, partnerships involving key players could exacerbate existing positions of market power through the value chain.

The CMA’s update paper provides details on how each risk would be mitigated by its principles, as well as the actions the CMA is taking now, and considering taking in the near future, to address these 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,” Cardell said.

“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.”