The UK Competition and Markets Authority (CMA), like many global regulators, is closely monitoring the artificial intelligence (AI) foundation model market. After conducting a five-month review, the CMA released its initial report on the UK market for AI foundation models on 18 September 2023. The report proposes guiding principles for the market, emphasizing the importance of accountability and focusing on three key areas. While the report does not currently identify competition concerns or advocate for immediate regulatory intervention, it underscores the CMA's commitment to promoting competition and innovation in the development of the foundation model market. The report aligns with recent statements made by Lina Khan, chair of the US Federal Trade Commission (FTC), suggesting that both US and UK regulators aim to stay ahead in regulating this emerging market. A significant focus of the report is the need for organizations to access essential resources, such as data, computing power, technical expertise, and capital, to effectively develop foundation models. The CMA highlights the importance of preventing early market entrants from gaining disproportionate market power through economies of scale and positive feedback loops generated by high volume user engagement. Maintaining diverse business models, including closed-source and open-source foundation models, is also a key concern for the CMA. Noting that open-sourcing models has fostered innovation in the sector, the report emphasizes the role of open-source models in reducing barriers for new players.

The CMA believes positive market outcomes are more likely if downstream firms have the flexibility to incorporate models into their products or services through application programming interfaces (APIs) and plugins. The report also emphasizes the benefits of promoting interoperability in the tech space. Anticompetitive effects that could hinder the exploitation of downstream services enabled by foundation models are a cause for concern, according to the report. The CMA calls for transparency in providing information about the use and limitations of technologies supported by foundation models to consumers and downstream firms. The CMA acknowledges that the guiding principles are not final and that they will continue engaging with the sector in developing them. As part of this effort, the CMA plans to engage with various stakeholders, including consumer groups, academics, foundation model developers, deployers, innovators, and new market entrants. While the CMA aims for a collaborative approach with the sector, it remains vigilant and ready to intervene if competition or consumer issues arise. An update on the principles, their reception, and adoption across the market, as well as further market trends, is expected to be published in early 2024. If you receive any information or meeting requests from the CMA or wish to engage in dialogue with them, please contact one of the Cooley lawyers listed below for assistance.