Briefings on CMA principles for regulating AI foundation models

In this briefing, we look at the principles in context and consider the impact of the principles in their current form and what is next.

On 18 September 2023, the Competition and Markets Authority (CMA) published some principles to guide the development and deployment of artificial intelligence (AI) foundation models (FMs) (ie, a type of AI technology trained on vast amounts of data that can be adapted to a wide range of tasks and operations (eg ChatGPT)). The principles are high-level and to be developed further but demonstrate that the CMA recognises the importance of taking a proactive approach towards the regulation of rapidly evolving AI markets. Given the permeation of AI into ever-increasing aspects of everyday life, how FMs are regulated is something in which we all have an interest. 

About the principles 

The principles are set out in a report published by the CMA as part of its initial review into competition and consumer protection issues relating to FMs. This follows the recommendation made by the UK Government in a White Paper, in March 2023, that the CMA and other existing regulators should assume responsibility for overseeing the development and use of AI.

The aim of the principles (listed below) is to protect consumers and ensure healthy competition in AI markets:

  •  ongoing ready access to key inputs
  • sustained diversity of open and closed business models
  • sufficient choice for businesses so they can decide how to use FMs
  • flexibility to switch or use multiple FMs according to need
  • fair dealing eg, no anti-competitive self-preferencing, tying or bundling
  • transparency to enable consumers and businesses to make informed choices

Holding developers and deployers of FMs accountable for the outputs provided to consumers is the overriding objective of the principles.

Impact of the principles in practice

In terms of content, the principles are clearly broadly framed and focus on the use of FMs once they exist.  This is unsurprising given the early stage the CMA is at in developing its understanding of the potential use and impact of AI. Once the CMA has developed its understanding, we may see the focus of regulation expand to the development of FMs, although this raises the fundamental question of the extent to which the CMA (or other regulators) should be involved in determining what “should” be done, as opposed to “can” be done, with AI technology. 

From an enforceability perspective, the principles are not statutory provisions. They are “guiding” principles, which aren't legally binding in themselves.This principles-based approach is in stark contrast to the codified approach in the EU under the proposed Artificial Intelligence Act (which is expected to complete the EU legislative process by the end of 2023).  However, it remains to be seen what steps the CMA might take to “enforce” the principles where it considers that the principles haven't been adopted.

More broadly, the CMA says it's likely that FMs and their deployment – “particularly where FMs are deployed in connection with other, more established activities” – will be relevant to the designation of candidates with Strategic Market Status under the Digital Markets, Competition and Consumer Bill (which is expected to come into force in the second half of 2024). This is potentially significant with respect to the scope of the CMA’s powers under the new digital markets regime, particularly since it remains unclear what problems FMs specifically pose from a competition law perspective.

What’s next?

The CMA will now undertake a “significant programme of engagement” with stakeholders and provide an update on its “thinking” on the principles, and how they have been received and adopted, in early 2024.

By the time that the CMA comes to publish this update, the technological/competitive landscape could be significantly different. It will be interesting to see how the landscape and the CMA’s understanding of it evolves, and how this will be reflected in the CMA’s approach (about which we would hope to see greater transparency with time).

In the meantime:

  • firms contemplating mergers or acquisitions between businesses involved in FMs that may meet the CMA’s jurisdictional thresholds are “strongly encouraged” to inform the CMA about the transaction 
  • firms who cooperate with actual or potential competitors involved in FMs (eg, to collaborate on new FM products) should take care to ensure that the terms of their cooperation comply with UK competition law
  • businesses are “strongly encouraged” to report any concerns about anti-competitive behaviour

If you would like to discuss any of the issues raised by this briefing in more detail, please contact the Mills & Reeve competition team.  

Our content explained

Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

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