CMA Publishes Initial Report on AI Foundation Models and Guiding Principles for Firms

On September 18, 2023, the UK Competition and Markets Authority (“CMA”) published an initial report on AI foundation models (“FMs”). 

The report comes further to the CMA’s initial review into FMs, launched on May 4. 

Following consultation with around 70 stakeholders, the CMA finds that AI has the potential to bring substantial benefits to both people and businesses. But it cautions that “if competition is weak or [AI] developers fail to heed consumer protection law, people and businesses could be harmed. For example, people could be exposed to significant levels of false and misleading information and AI-enabled fraud. In the longer term, a handful of firms could use FMs to gain or entrench positions of market power and fail to offer the best products and services and/or charge high prices.”

The CMA’s report is not intended to establish firm conclusions. Rather, it presents a spectrum of possible market outcomes—ranging from “positive” to “concerning”—and identifies factors which might contribute to these.  In doing so, it focuses on three themes:

• Competition in the development of FMs, considering in particular the various important inputs required.
• The impact of FMs on competition in other markets, for example the potential of FM-powered products to displace incumbents and disrupt competitive dynamics.
• Consumer protection, in particular the potential risks to consumers from FM-powered tools, and potential options to address or mitigate these.

The CMA has also published a set of principles to aid the ongoing development and use of FMs.

In terms of next steps, the CMA plans to continue its information-gathering and outreach activities, with a view to publishing a further update in “early 2024”.

Please click here to read the full alert memorandum.

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Special thanks go to Mallika Sen for her invaluable contributions to this memo.