Thank you for the opportunity to open this morning's discussion with some reflections from the UK's Competition and Markets Authority (CMA) on our work on the impact of foundation models - or generative AI - on competition and consumer protection. I'd like to start by taking a step back to reflect on why this work matters - and why we think it's important that it happens now. We know these models could hold genuinely transformative promise for our societies and economies, massively increasing productivity, transforming many existing products and services for both businesses and consumers, and bringing to market new innovations and as yet unimagined technology developments across all sectors of the economy.
It's difficult to know when we are witnessing a true paradigm shift. By their very nature, pivotal moments in history are often characterised by heightened uncertainty. But we can be alert for signals that something is unfolding which we will later look back on and recognise as genuinely transformative.
As the Chief Executive of the CMA, looking across the fast-moving developments in both the development and deployment of these models, I feel a keen responsibility to ensure that we're using the full range of the CMA's powers to make sure those markets are underpinned by fair, open and effective competition, as well as strong consumer protection. And I think if you look at the statements and actions of various authorities around the world, including in Europe and here in the US, you can see a shared focus on this.
Why do I feel that responsibility? Because it is those conditions of fair, open and effective competition that will drive greater innovation, choice and lower prices for businesses and consumers, as generative AI is increasingly used across the whole economy. And it is those market conditions which enable independent start-ups and challenger firms to bring forward disruptive innovations, gaining ground on, and potentially upending, the entrenched market positions of today's large, digital firms.
The foundation models ecosystem has experienced some genuinely groundbreaking advances recently, and is consequently moving at pace. That's why we launched an initial review in May last year, publishing our analysis in a report last September. Whilst our analysis recognised the multitude of benefits these models might bring, we also identified a risk that the markets could develop in ways which would cause us concern from a competition and consumer protection standpoint.
To mitigate that risk, we proposed a set of underlying principles to help sustain vibrant innovation and to guide the markets toward positive outcomes. These are:
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access: meaning ongoing ready access to key inputs
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diversity: to ensure sustained diversity of models and model types
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choice: enabling sufficient choice for businesses and consumers to decide how to use foundation models
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fair dealing: by which we mean, for example, no anti-competitive bundling, tying or self-preferencing
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transparency: in terms of consumers and businesses having the right information about the risks and limitations of models
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accountability: ensuring developer and deployer accountability for outputs
Without fair, open, and effective competition and strong consumer protection, underpinned by these principles, we see a real risk that the full potential of organisations or individuals to use AI to innovate and disrupt will not be realised, nor its benefits shared widely across society.
Since last September, we have continued to track market developments and have engaged widely with a range of different stakeholders. We will be publishing an update report today, so this is an excellent opportunity to share some key highlights.
The foundation models ecosystem has continued to develop at a whirlwind pace, with a spate of industry announcements spanning new model launches, investments and partnerships, high-profile hirings (and in some cases firings), and a remarkable drumbeat of innovation and new use cases.
As exciting as this is, our update report will also reflect a marked increase in our concerns about the directional trend of these developments. Specifically, we believe the growing presence across the foundation models value chain of a small number of incumbent technology firms, which already hold positions of market power in many of today's most important digital markets, could profoundly shape these new markets to the detriment of fair, open and effective competition, ultimately harming businesses and consumers, for example by reducing choice and quality and increasing price.
And in assessing this risk, we are determined to apply the lessons of history. As I look back at the rise of digital markets over the last 10 to 15 years, of course I ask myself whether competition authorities could, or should, have better predicted the pace and scale of digital transformation. Could we have responded faster to the competitive threats posed by large digital platforms, recognising earlier that the tools we had would need adapting to address the unique challenges posed by this new breed of businesses? With the benefit of hindsight, I think the answer is almost certainly "yes".
Now we understand much more about digital markets. And it's important to emphasise always the enormous benefits that technology has unlocked. But we have also seen the winner-take-all dynamics which have led to the rise of a small number of powerful platforms. And we have seen instances of those incumbent firms leveraging their core market power to obstruct new entrants and smaller players from competing effectively, stymying the innovation and growth that free and open markets can deliver for our societies and our economies. We have also seen that those firms can engage in behaviours that exploit people and businesses, like undermining choice and control through harmful online architecture, or through anti-competitive tying and bundling of products and services. So, while the eventual outcomes of the paradigm shift we may be witnessing in generative AI are currently uncertain, it's important we take what we have learned into account as we consider our response.
The increased presence of the largest and most established technology firms across multiple levels of the foundation models value chain is happening both through direct vertical integration but also through partnerships and investments - including in the supply of critical inputs such as data, compute and technical expertise, in model development, and in the provision of products and services (like apps and platforms) allowing businesses and end consumers to access and deploy foundation models.
I'd like to share a chart from our update report which illustrates the point.
Figure 1: Illustration of the presence of GAMMA firms across the FM value chain [Footnote 1]
Figure 1: This figure shows which of the GAMMA firms are operating in each of the following parts of the FM value chain:
(1) Compute: Amazon, Google and Microsoft
(2) Data: Google, Meta and Microsoft
(3) FM development: Amazon, Apple, Google, Meta and Microsoft
(4) FM partnerships and agreements: Amazon, Google and Microsoft
(5) FM release: Amazon, Google and Microsoft
(6) Search: Google and Microsoft
(7) Social
