On 4 May 2023, the UK’s Competition and Markets Authority (“CMA”) announced the launch of an initial review of competition and consumer protection principles that are designed to guide the ongoing development and use of artificial intelligence (“AI”) foundation models.

These models are a type of AI technology trained on large amounts of data that may be adapted to a wide range of operations. Foundation models include many forms of AI that are popular with news and media outlets at the moment, including large language models and generative AI models, which have substantially accelerated in development and attention over the past six months.

The review recognises that the best way to help emerging technologies reach their full potential is by enabling them to develop in open, competitive markets, and the CMA will take a key role in support of this. The review follows in the wake of the publication of the UK Government’s AI white paper (“Paper”) in March 2023 which sets out the UK’s approach to regulating AI alongside a request for UK regulators to think about how the “innovative development and deployment of AI” can be supported. In support of this initiative, the Paper provides regulators with five key principles: safety, security and robustness; appropriate transparency and explainability; fairness; accountability and governance; and contestability and redress. The CMA’s review also follows the response from the UK’s data protection regulator, the Information Commissioner’s Office (“ICO”), April 2023.

The CMA’s review will focus on three key themes:

  1. Competition and barriers to entry in the development of foundation models: this aims to examine how competition currently works in the development of foundation models and how this may be improved. Particularly, the review will explore the extent to which there are economies of scale and other characteristics of foundation model development and deployment that would tend towards centralisations, consolidation and integration;
  2. The impact foundation models may have on competition in other markets: this aims to examine the potential for the market to develop in ways that may frustrate competition and innovation; and
  3. Consumer protection: this aims to examine the extent to which current practices and incentives in the market are leading to accurate and safe foundation models, ensuring consistency with businesses’ obligations under consumer protection law.

This focus aligns with the CMA’s wider strategic priority of ensuring effective competition in emerging markets set out in their Annual Plan 2023/24.

Supporting open, competitive markets, protecting consumers and businesses from unfair behaviours, and enabling innovate to thrive are core to the CMA’s mandate. The goal of the initial review is to both understand and help the emergent and rapidly scaling technology develop to bring benefits for people, business and the economy in the UK for the public good in line with this mandate. In the foreword to the initial review, the CMA highlights that “We are at a pivotal moment in the development of this technology”, recognising that these foundational models have the potential to transform how people and businesses behave. The review will consider both the opportunities and risks these models could bring for competition and consumer protection and provide insight into the principles needed to guide these markets as they evolve.

This presents as a largely positive step by the CMA who appear to be embracing the pro-innovation and regulator-led approach proposed by the UK Government. The review demonstrates that the CMA is taking proactive steps to understand the transformative potential of AI technologies in existing markets.

It currently seems that the CMA’s consumer protection focus is on development and deployment of foundation models in line with the existing frameworks of consumer protection law, particularly around the use of false or misleading information. The CMA also acknowledges the consumer benefits (from a commercial and end-user protection perspective) of the increased use of AI foundation models. Firms should in any event be considering and complying with these requirements in respect of activity with a B2C component.

The CMA is welcoming submissions from interested parties until 2 June 2023.

In addition to considering received responses, the regulator will evaluate existing research, issue short information requests to key stakeholders from customers to academics, and meet key interests parties through bilateral meetings to further discussion.

The CMA plans to publish a report setting out its findings in early September 2023.

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For more information on AI and the emerging legal and regulatory standards, visit DLA Piper’s focus page on AI.

DLA Piper continues to monitor updates and developments of AI and its impacts on industry across the world. For further information or if you have any questions, please contact your usual DLA Piper contact.