Like many regulators around the world, the UK Competition and Markets Authority (CMA) has been closely watching the development of the market for basic artificial intelligence (AI) models.
Following a initial five-month on-market review released earlier this yearThe CMA published its initial report on the UK basic AI models market on September 18, 2023.
The report outlines a number of proposed guiding principles for the AI โโfoundation models market, which will be relevant to any organization developing or deploying foundation models in the UK.
Underpinned by an overarching principle of โaccountabilityโ for outcomes created by AI systems, the CMAโs proposed guiding principles focus on three key areas:
- Development of the base model, with key principles of "access" and "diversity".
- Use of basic models in other markets, with key principles of "choice", "flexibility" and "fair treatment".
- Use of basic models by consumers, with the key principle of "transparency."
The report does not flag any current competition concerns or advocate for any immediate regulatory intervention. However, a common thread running throughout the report is the CMA's aim to ensure that vibrant competition and innovation is promoted in the development of the base model market.
The objectives of the CMA outlined in the report echo Lina Khan's recent statementspresident of the United States Federal Trade Commission (FTC), who highlighted that the FTC is closely watching the sector.
It is clear that US and UK regulators do not want to be caught behind the curve in regulating this important and emerging market.
Development of the base model.
Key principle: 'Access'
A key focus of the report is the need to maintain organizations' ability to access the key resources needed to successfully develop a core model: data, computing power, technical expertise and capital.
In the report, the CMA highlights the need to ensure that successful market pioneers do not gain entrenched and disproportionate market power by creating economies of scale and benefiting from positive feedback loops, which drive model improvement and come from a large volume of users. engagement with AI systems in the wild.
The report notes that a positive market outcome would be a dynamic market in which a variety of core model developers could gain access to these resources, on reasonable terms, allowing them to effectively challenge these incumbents and pioneers.
Key principle: 'Diversity'
The report highlights the need to maintain a sustained diversity of business models, supported by the availability of both closed source and open source core models.
The CMA identifies that there are a variety of ways in which a model could be considered "open"; For example, some may simply be the "raw ingredients" of the model and require expensive and time-consuming pre-development and training, while others may come "pre-trained" with weights and biases, meaning they only require fine-tuning. fast and relatively inexpensive.
The CMA notes that many major market players have already opened certain models (including several refined and high-performance models) and notes that this has led to vibrant innovation in the sector. The CMA notes that the continued availability of these open source models will help reduce barriers to entry for new players. By contrast, if access to key resources, such as data, computing power, technical expertise and capital, were limited to just a handful of companies, the CMA's concern is that larger and more successful market players might be able and be incentivized to offer only closed services. sourcing models, which could result in disproportionate entrenchment and market power.
Use of foundation models in other markets.
Key principle: 'Choice'
The CMA's position is that positive market outcomes are likely to occur if downstream companies have effective options for how to incorporate models into their products or services (for example, through application programming interfaces (APIs) and plug-ins. ), including the ability to develop models. internally (an approach that would likely be supported by the continued availability of pre-trained open source models).
Key principle: 'Flexibility'
Addressing the common regulatory objective of driving measures towards greater interoperability in the technology space, the CMA highlights the benefits of:
- Organizations that implement core models can โmix and matchโ multiple core models.
- Consumers have the ability to easily switch to best-of-breed solutions without technical or contractual restrictions.
Key principle: "fair treatment"
The report also highlights concerns about potential anti-competitive effects that could hinder the successful exploitation of downstream services enabled by core models, where companies that could acquire market power impose anti-competitive contractual terms or engage in anti-competitive conduct (for example, excluding other upstream or downstream services).
Use of base models by consumers.
Key principle: 'Transparency'
The report calls for providing consumers and downstream companies with information on the use and limitations of technologies supported by basic models. To support this principle, the CMA highlights the importance of developers providing organizations implementing their technology with the information necessary to enable them to manage their responsibilities to consumers (for example, through the use of 'template cards' which can be used to provide users and implementers with basic information about a model).
Next steps
The CMA itself admits that it does not consider the guiding principles "the finished article"; rather, they are the product of ongoing dialogue with the sector and inform its thinking and development of principles. The CMA plans to begin a "major engagement programme" and speak to a wide range of stakeholders, from consumer groups and academics to leading grassroots model developers and implementers, along with innovators and new entrants to the market. The emphasis of the report is that the CMA is largely seeking a collaborative approach with the sector.
That said, it is also clear from the report that the CMA is watching the sector closely and will not hesitate to intervene if competition or consumer issues begin to arise.
The next time we will hear the CMA's thinking will be in early 2024, when it will publish an update on its principles, including its view on how those principles have been received and adopted across the market, as well as other market perspectives. trends.
How can we help?
If you receive an information or meeting request from the CMA or would like to engage in proactive dialogue with the CMA, please contact one of the Cooley attorneys listed below for assistance.
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