CMA proposes new competition and consumer principles for AI foundation models

The Competition and Markets Authority (CMA) has published a report on its initial review of artificial intelligence foundation models (FMs). The report sets out the CMA’s analysis of the potential impacts of FMs on competition and consumers and proposes seven new competition and consumer protection principles for future development and deployment of FMs.

FMs are systems with broad capabilities that can be adapted to a range of purposes. Recent developments, and rapid adoption of examples like ChatGPT and Office 365 Copilot, have highlighted their potential to drive innovation and disrupt markets. This has led to the CMA carrying out its review of potential competition and consumer impacts. In this blog post we summarise the CMA’s key findings and the proposed new competition and consumer principles.

Scope

The CMA makes clear that its review and report focus on issues within its remit as competition and consumer regulator but notes that other important issues raised by FMs (including safety, security, privacy, intellectual property and copyright, and human rights) are being considered by other regulators and government.

The aim of the review was for the CMA to gain an early understanding of the potential for FMs to drive innovation and disrupt markets.

1. the development of FMs;
2. how FMs are used in other markets and user applications; and
3. the experience consumers have when using these new AI tools (either standalone or when incorporated into other products or services), in particular whether they can make informed choices and are treated fairly.

Competition

The report details different potential FM competition scenarios and the potential for positive and negative competitive outcomes.

The CMA concludes that the market is more likely to produce positive outcomes if:

• firms can choose between a range of options when deciding how to adopt FMs in their businesses.
• FMs and the systems they use are interoperable with one another.
• consumers can port their data easily between services, so they do not have to ‘start from scratch’ when wanting to switch or use multiple FM services.
• businesses are not subject to anti competitive conduct, including anti competitive self preferencing, tying or bundling.
• The market is more likely to develop positively if markets are open and competitive where FM developers and deployers are subject to competitive constraints that weaken the effect of any possible advantages that may emerge in the future, such as data feedback effects or first mover advantages.

Consumer

The report details different potential FM consumer scenarios and the potential for positive and negative consumer outcomes.

The CMA concludes the market is more likely to develop towards positive outcomes if:

• FM developers and deployers face competitive pressure to improve the reliability and accuracy of their models.
• there is a mechanism to determine the proper allocation of accountability and responsibility.
• consumers are made aware if content is FM-generated and the risks and limitations associated with FM-generated content, such as whether it is reliable, so they can make informed choices.
• FM developers provide sufficient, understandable, and accurate information to businesses, so they understand the relevant characteristics of the models, manage their own risk and prevent harm to consumers.
• FM developers and deployers protect consumers by ensuring that appropriate safeguards are in place to protect people from bad actors using FMs.

The principles

The CMA has identified the different markets for the different stages of development and deployment and proposed principles for each stage as follows:

• Model development
  • Access – ongoing ready access to key inputs
  • Diversity – sustained diversity of business models, including both open and closed
• Use of models in other markets
  • Choice – sufficient choice for businesses so they can decide how to use FMs
  • Flexibility – flexibility to switch or use multiple FMs according to need
  • Fair dealing – no anti-competitive conduct, including anti-competitive self-preferencing, tying or bundling
• Use of models by consumer
  • Transparency – consumers and businesses are given information about the risks and limitations of FM-generated content so they can make informed choices.

These principles are proposed subject to an overarching principle of Accountability to ensure that FM developers and deployers are accountable for outputs provided to consumers at all stages of development and deployment.

The CMA’s principles will inform the CMA’s approach to the development and use of AIs including when it assumes new responsibilities under the Digital Markets, Competition and Consumer (DMCC) Bill currently going through Parliament.

Regulatory powers

The CMA’s view is that its existing regulatory powers are sufficient and will be enhanced once the DMCC Bill comes into force.

It warns that it will be monitoring the development and deployment of FMs and will not hesitate to use its powers if it sees competition or consumer problems developing.

As a next step the CMA is embarking on engagement with a wide range of stakeholders and will publish an update on its thinking on the principles, and how they have been received and adopted, in early 2024, also reflecting on further developments in the market.

Comment

The CMA has continued the UK government’s approach of a light-touch principles-based approach to AI for now. It will be interesting to see if this approach continues to be endorsed by the UK Government at the UK AI Safety Summit at Bletchley Park in November.