Tech & Sourcing @ Morgan Lewis


The UK Competition and Markets Authority (CMA) recently published an update paper outlining its concerns with artificial intelligence (AI) foundation models (FMs). Market players in this space should remain mindful of the CMA’s growing interest as the regulator continues its dedicated program to consider the impact of FMs on markets throughout 2024, with a further update anticipated in August.

The paper cites three key risks to competition of FMs:

  1. Firms that control critical inputs for developing FMs (being “compute, data, and expertise”) may restrict access to them to shield themselves from competition.
  2. Powerful incumbents could exploit their positions in consumer- or business-facing markets to distort choice in FM services and restrict competition in FM deployment.
  3. Partnerships involving key players could reinforce or extend existing positions of market power through the value chain.

The extent of the aforementioned risks will depend on the structure of the FM-related market at play.

The CMA will continue to deploy existing powers at its disposal, such as market investigations and merger control reviews, to assess the FM sector. In particular, regarding vertical integration and partnerships, the CMA could use its powers to review partnerships (that are not subject to UK merger control) through investigations into whether such partnerships are anticompetitive agreements or give rise to abuses of market dominant positions or through broader market investigations.

For more on the CMA’s update paper, read our full LawFlash.