Generative AI promises to reshape the digital world. Agreement is widespread that this technology will have a significant impact on the economy, as noted by the European Commission’s Executive Vice President Margrethe Vestager in February 2024[1].

The consensus is clear: this is a transformative technology; one that will change the way we work, the way we learn, the way we buy and sell – even the way we think. It will touch virtually every aspect of the economy, and it won’t take long for these effects to be felt.

Since the launch of ChatGPT’s OpenAI chatbot in November 2022, the rise of this technology has been impressive. Competition authorities and policymakers globally are racing to ensure they can act to ensure that competition thrives in these new markets and that they do not further entrench the positions of large technological firms. Several authorities have already conducted initial studies to understand the new Generative AI market [2] and have started to look into partnership agreements between AI startups and large incumbent digital firms [3]. The urgency to act was highlighted in Vestager’s call to arms in the same speech, where she highlighted that “if we don’t act soon, we will find ourselves, once again, chasing solutions to problems we did not anticipate.”[4].

An issue that has been highlighted is the prevalence of partnerships between large digital players and the new digital firms forming in the Generative AI space. The concern is that these large digital players may, via these partnerships, cement a critical position in the Generative AI space while avoiding the usual scrutiny that is reserved for merger cases where a change of control occurs [5]. The Consumer and Markets Authority (“CMA”), for example, found more than 90 partnerships between Google, Amazon, Meta, Microsoft, Apple, Nvidia (“GAMMAN”) (hereinafter, “big tech”), and AI startups. It subsequently opened investigations into Microsoft’s partnerships with Inflection AI, Mistral AI, and OpenAI and Amazon’s partnership with Anthropic [6].

We look into: How is the Generative AI market shaping up and what are its primary business models? What are the theories of harm that underpin existing concerns around partnerships? How can we use the economic toolbox to assess partnerships and identify those that are more likely to create competition concerns?

[1] Margrethe Vestager, Executive Vice President, European Commission. Making Artificial Intelligence Available to All – How to Avoid Big Tech’s Monopoly on AI. Brussels (Feb. 19, 2024).

[2] (i) CMA, AI Foundation Models Update paper (2024), (ii) Autoridade Concorrência, Competition and Generative Artificial Intelligence (2023), (iii) Press Release, European Commission, Commission launches calls for contributions on competition in virtual worlds and generative AI, (Jan. 9, 2024), https://ec.europa.eu/commission/presscorner/detail/ en/IP_24_85.

[3] See, for example, Press Release, CMA, CMA seeks views on AI partnerships and other arrangements (Apr. 24, 2024), https://www.gov.uk/government/news/cma-seeks- views-on-ai-partnerships-and-other-arrangements.

[4] Vestager, supra note 2.

[5] A joint submission to the CMA on these partnerships accuses large digital companies of ‘deliberately reconfiguring their “deals” to look like innocent “agreements,” which is fundamentally a circumvention of scrutiny.’ Irish Council for Civil Liberties, Open Markets Institute, Foxglove, Rebalance Now, ARTICLE 19 & Mozilla Foundation, Submission to CMA on Microsoft-OpenAI “partnership” merger inquiry, Joint Submission to the Competition and Markets Authority, (8 Jan. 2024), available online at https://www.iccl.ie/wp-content/uploads/2024/01/20240108-CSOs-Submission-To-CMA-on-MS-OpenAI-partnership.pdf, visited June 30 2024.

[6] CMA, supra note 34.