\n<\/p>\n
Antitrust enforcers on both sides of the Atlantic are grappling to get a handle on AI, a conference in Brussels heard yesterday. It\u2019s a moment that demands \u201cextraordinary vigilance\u201d and clear-sighted focus on how the market works, suggested top US competition law enforcers.<\/p>\n
From the European side, antitrust enforcers sounded more hesitant over how to respond to the rise of generative AI \u2014 with a clear risk of the bloc\u2019s shiny new ex ante regime for digital gatekeepers missing a shifting tech target.<\/p>\n
The event \u2014 organized by the economist Cristina Caffarra and entitled Antitrust, Regulation and the New World Order<\/a> \u2014 hosted heavy-hitting competition enforcers from the US and European Union, including FTC chair Lina Khan and the DoJ\u2019s assistant attorney general Jonathan Kanter, along with the director general of the EU\u2019s competition division, Olivier Guersent, and Roberto Viola, who heads up the bloc\u2019s digital division which will start enforcing the Digital Markets Act (DMA) on gatekeeping tech giants from early next month.<\/p>\n While conference chatter ranged beyond the digital economy, much of the discussion was squarely focused here \u2014 and, specifically, on the phenomenon of big-ness (Big Tech plus big data & compute fuelled AI) and what to do about it.<\/p>\n \u201cOnce markets have consolidated cases take a long time. Getting corrective action is really, really challenging. So what we need to do is be thinking in a future looking way about how markets can be built competitively to begin with, rather than just taking corrective action once a problem has condensed,\u201d warned FTC commissioner Rebecca Slaughter. \u201cSo that is why you\u2019re going to hear \u2014 and you do hear from competition agencies \u2014 a lot of conversation about AI right now.\u201d<\/span><\/p>\n Speaking via videolink from the US, Khan, the FTC\u2019s chair, further fleshed out the point \u2014 describing the expansion and adoption of AI tools as a \u201ckey opportunity\u201d for her agency to put into practice some of the lessons of the Web 2.0 era when she said opportunities were missed for regulators to step in and shape the rules of the game.<\/p>\n \u201cThere was a sense that these markets are so fast moving it\u2019s better for government just to step back and get out of the way. And two decades on, we\u2019re still reeling from the ramifications of that,\u201d she suggested. \u201cWe saw the solidification and acceptance of exploitative business models that have catastrophic effects for our citizenry. We saw dominant firms be able to buy out a whole set of nascent threats to them in ways that solidified their moats for a long time coming.<\/p>\n \u201cThe FTC as a case on going against Meta, of course, that\u2019s alleging that the acquisitions of WhatsApp and Instagram were unlawful. And so we just want to make sure that we are learning from those experiences and not repeating some of those missteps, which just requires being extraordinarily vigilant.\u201d<\/p>\n The US Department of Justice\u2019s antitrust division has \u201ca lot\u201d of work underway with respect to AI and competition, including \u201cnumerous\u201d active investigations, per Kantar, who\u00a0suggested the DoJ will not hesitate to act if it identifies violations of the law \u2014 saying it wants to engage \u201cquickly enough to make a difference\u201d.<\/p>\n \u201cWe\u2019re a law enforcement agency and our focus is on making sure that we are enforcing the law in this important space,\u201d he told the conference. \u201cTo do that, we need to understand it. We also need to have the expertise. But we need to start demystifying AI. I think it\u2019s talked about in these very grand terms almost as if it\u2019s this fictional technology \u2014 but the fact of the matter is these are markets and we need to think about it from the chip to the end user.<\/p>\n \u201cAnd so where is their accommodations? Where is their concentration? Where are their monopolistic practices? It could be in the chips. It could be in the datasets. It can be in the development and innovation on the algorithms. It can be in the distribution platforms and how you get them to end users. It can be in the platform technologies and the APIs that are used to help make some of that technology extensible. These are real issues that have real consequences.\u201d<\/p>\n Kantar said the DoJ is \u201cinvesting heavily\u201d, including in its own technology and technologists, to \u201cmake sure we understand these issues at the appropriate level of sophistication and depth\u201d \u2014 not only to be able to have the firepower to enforce the law on AI giants but also, he implied, as a sort of shock therapy to avoid falling into the trap of thinking about the market as a single<\/span> \u201calmost inaccessible\u201d technology. And h<\/span>e likened the use of AI to how a factory may be used in lots of different parts of business and different industries.<\/p>\n \u201cThere\u2019s going to be lots of different flavours and implementation. And it\u2019s extremely important that we start digging in and having a sophisticated, hands-on approach to how we think about these issues,\u201d he said. \u201cBecause the fact of the matter is one of the realities about these kinds of markets is that they have massive feedback effects. And so the danger of these markets tipping the danger of these markets becoming the dominant choke points is perhaps even greater than in other types of markets, more traditional markets. And the impact on society here is so massive, and so we have to make sure that we are doing the work now, at the front end, to get out in front of these issues to make sure that we are preserving competition.\u201d<\/p>\n Asked how the FTC\u2019s dealing with AI, Khan flagged how the agency has also built up a team of in-house technologists \u2014 which she said is enabling it to go \u201clayer by layer\u201d, from chips, cloud and compute to foundational models and apps, to get a handle on key economic properties and look for emerging bottlenecks.<\/p>\n \u201cWhat is the source of that bottleneck? Is it, you know, supply issues and supply constraints? Is it market power? Is it self reinforcing advantages of data that are risking locking in some of the existing dominant players \u2014 and so it\u2019s a moment of diagnosis and wanting to make sure that our analysis and understanding across the stack is accurate so that we can then be using any policy or enforcement tools as appropriate to try to get ahead where we can. Or at least not be decades and decades behind.\u201d<\/p>\n \u201cThere\u2019s no doubt that these tools could provide enormous opportunity that could really catalyse growth and innovation. But, historically, we\u2019ve seen that these moments of technological inflection points and disruption can either open up markets or they can be used to close off markets and double down on existing monopoly power. And so we are taking a holistic look across the AI stack,\u201d she added.<\/p>\n Khan pointed to the\u00a06(b) inquiry<\/a> the FTC launched last month, focused on generative AI and investments, which she said would look to understand whether there are expectations of exclusivity or forms of privileged access that might be giving some dominant firms the ability to \u201cexercise influence or control over business strategy in ways that can be undermining competition\u201d.<\/p>\n She also flagged the agency\u2019s consumer protection and privacy mandate as top of mind.\u00a0\u201cWe\u2019re very aware of the ways in which you see both shapeshifting by players but also the ways in which conglomerate entities can sometimes get a further advantage in the market if they\u2019re collecting data from one arm and then able to endlessly use it throughout the business operations. So those are just some of the issues that are top of mind,\u201d she said.<\/p>\n \u201cWe want to make sure that the hunger to vacuum up people\u2019s data that\u2019s going to be stemming from the incentive to constantly be refining and improving your models, that that\u2019s not leading to wholesale violations of people\u2019s privacy. That\u2019s not baking in, now, a whole other set of reasons to be engaging in surveillance of citizens. And so that those are some issues that we\u2019re thinking about as well.\u201d<\/span><\/p>\n \u201cWe have huge mindfulness about the lessons learned from the hands off approach to the social media era,\u201d added Slaughter. \u201cAnd not wanting to repeat that. There are real questions about whether we have already missed a moment given the dominance of large incumbents in the critical inputs for AI, whether it\u2019s chips or compute. But I think we are not willing to take a step back and say this has already happened so we need to let it go. <\/span><\/p>\n \u201cI think we\u2019re saying how can we make sure we understand these things and move forward? It\u2019s why, again, we\u2019re trying to use all the different statutory tools that Congress gave us to move forward, not just ex post enforcement cases or merger challenges.\u201d<\/span><\/p>\n Former FTC commissioner, Rohit Chopra, now a director of the Consumer Financial Protection Bureau, also used the conference platform to deliver a a pithy call-to-action on AI, warning: \u201cIt is incumbent upon us, as we see big tech firms and others continue to expand their empires, that it is not for regulators to worship them but for regulators to act.\u201d<\/p>\n \u201cI think actually the private sector should want the government to be involved to make sure it is a race to the top and not a race to the bottom; that it is meaningful innovation, not fake, fraudulent innovation; that it\u2019s human improving and not just beneficial to a click at the top,\u201d he added.<\/p>\n On the European side, enforcers taking to the conference stage faced questions about shifting attitudes to Big Tech M&A, with the recent example of Amazon abandoning its attempt to buy iRobot in the face of Commission opposition. And how \u2014 or whether \u2014 AI will fall in scope of the new pan-EU DMA.<\/p>\n Caffarra wondered whether Amazon ditching its iRobot purchase is a signal from the EU that some tech deals should just not be attempted \u2014 asking if there\u2019s been a shift in bloc\u2019s attitude to Big Tech M&A? DG Comp\u2019s Guersent replied by suggesting regional regulators have been getting less comfortable with such mergers for a while.<\/p>\n \u201cI think the signal was given some time ago,\u201d he argued. \u201cI mean, think of Adobe Figma<\/a>. Think of Nvidia Arm<\/a>. Thinks of Meta Kustomer<\/a>, and even think \u2014 just to give the church in the middle of the village, as we say in France \u2014 think about Microsoft Activision<\/a>. So I do not think we are changing our policy. I think that it is clear that the platforms, to take a vocabulary of the 20th century, in many ways acquired a lot of characteristics of what we used to call essential facilities.\u201d<\/p>\n \u201cI don\u2019t know if we would have prohibited [Amazon iRobot] but certainly DG Comp and EVP [Margrethe] Vestager would have proposed to the college to do it and I\u2019ve no indication that the college would have had a problem with that,\u201d he added. \u201cSo the safe assumption is probably good with that. But, for me, it\u2019s a relatively classical case, even if it\u2019s a bit more subtle \u2014 we will never know because we will never publish the decision we have drafted \u2014 of self referencing. We think we have very good case for this. A lot of evidence. And we actually think that this is why Amazon decided to drop the case \u2014 rather than take a negative decision and challenge it in court.\u201d<\/p>\n He suggested the bloc has evolved its thinking on Big Tech M&A \u2014 saying it\u2019s been \u201ca learning curve\u201d and pointing back to the 2014 Facebook WhatsApp merger as something of a penny dropping moment.<\/p>\n The EU waived the deal through at the time, after Meta (then Facebook) told it it could not automatically match user accounts between the two platforms. A couple of years later it did exactly what it had claimed it couldn\u2019t<\/a>. And a few years further on Facebook was fined $122M by the EU for a misleading filing<\/a>. But the damage to user privacy \u2014 and further market power entrenchment \u2014 was done.<\/p>\n \u201cI don\u2019t know whether we would accept it today,\u201d said Guersent of the Facebook WhatsApp acquisition. \u201cBut that was [about] eight years ago. And this is where we started to say we were lacking the depths of reflection. We had never thought enough about it. We didn\u2019t have the empirical work\u2026 Like everything it\u2019s not that you wake up a morning and decide I will change my policy. It takes time.\u201d<\/p>\n \u201cIt\u2019s about entrenchment. And of course the sophistication of the practices, the sophistication of what they could do, or they actually do, is increasing and therefore the sophistication of the analysis has to be increasing as well. And that is a real challenge as well as the number of data we have to crunch,\u201d he added.<\/p>\n If Guersent was willing to confess to some past missteps, there was little sense from him the EU is in a hurry to course correct \u2014 even now it has its shiny new ex ante regime in place.<\/p>\n \u201cThere is and will be a learning curve,\u201d he predicted of the DMA. \u201cYou shouldn\u2019t expect us to have bright ideas about what to do on everything under the sun. Certainly not with 40 people \u2014 a slight message to whoever has a say on the staffing.\u201d<\/p>\n He went on to cast doubt on whether AI should fall in direct scope of the regulation, suggesting issues arising around artificial intelligence and competition may be best tackled by a wider team effort that loops in national competition regulators across the EU, rather than falling just to the Commission\u2019s own (small) staff of gatekeeper enforcers.<\/p>\n \u201cGoing forward we have the cloud. We have AI. AI is a divisive issue in basically all the fields. We have\u2026 all sorts of bundling, tying and nothing really new but should it be designated? Is it a DMA issue? Is it one or two or national equivalent standard issue?\u201d he said. \u201cI think the the only way to effectively tackle these issues \u2014 for me, I know, for my colleagues \u2014 is within the ECN [European Competition Network] because we need to have a critical mass of brains and manned force that the Commission doesn\u2019t have and will not have in the near future.\u201d<\/p>\n Guersent also ruffled a few feathers at the conference by dubbing competition a mere \u201cside dish\u201d, when it comes to fixing what he suggested are complex global issues \u2014 a remark which earned him some pushback from Slaughter during her own turn on the conference stage.<\/p>\n \u201cI don\u2019t agree with that. I think competition underlies and is implicated by all the work of government. And we\u2019re either going to do that with open eyes thinking about the competition effect of different government policies and choices or we\u2019re gonna do that with our eyes closed. But either way we\u2019re gonna affect competition,\u201d she argued.<\/p>\n Another EU enforcer, DG Connect\u2019s Roberto Viola, sounded a little more positive that the bloc\u2019s newest tool might be handy to addressing AI-powered market abuse by tech giants. But asked directly during a fireside chat with Caffarra whether (and when) the issue of market power actors extending their power into AI \u2014 \u201cbecause they own critical infrastructure, critical inputs\u201d \u2014 will get looked at by the Commission, he danced around an answer.<\/p>\n \u201cTake a voice assistant, take a search engine, take the cloud and whatever. You immediately understand that AI can come in scope of DMA quite quickly,\u201d he responded. \u201cSame for DSA [Digital Services Act (DSA) \u2014 which, for larger platforms, brings in transparency and accountability requirements on algorithms that may produce systemic risks]. If toward the more kind of societal risk end. I mean, if a search engine which is in scope of the DSA is fuelled by AI they are in scope.\u201d<\/p>\n Pressed on the process that would be required \u2014 at least in the case of the DMA \u2014 to bring generative AI tools in scope of the ex ante rules, he conceded there probably wouldn\u2019t be any overnight designations. Though he suggested some applications of AI might fall in scope of the regime indirectly, by merit of where\/how they\u2019re being applied.<\/p>\n \u201cLook, if it walks like a duck and quacks like a duck it\u2019s a duck. So take\u2026 a search engine. I mean, if the search function is performed through an algorithm it\u2019s clearly in scope. I mean, there\u2019s no doubt. I\u2019m sure when we go to the finesse of it there will be in an army of legal experts that will argue all sorts of things about the fine distinction between one or the other. In any case, DMA can look at also other services, can look at the tipping markets, can look at an expansion of the definition. So in any case, if necessary, we can go that way,\u201d he said.<\/p>\n \u201cBut, largely, when we see how AI generative AI is used in enhancing the offering of web services \u2014 such as [in search functions]\u2026 the difference between one or the other becomes very subtle. So I\u2019m not saying that tomorrow we\u2019ll jump to the conclusion that those providing generative AI fall straight into into the DMA. But, clearly, we are looking at all the similarities or the blending of those services. And the same applies for DSA.\u201d<\/p>\n Speaking during another panel, Benoit Coeure, president of France\u2019s competition authority, had a warning for the Commission over the risks of strategic indecision \u2014 or, indeed, dither and delay \u2014 on AI.<\/p>\n \u201cThe cardinal sin in politics is jumping from one priority to another without delivering and without evaluating. So that means not only DMA implementation but DMA enforcement. And there the Commission will have to make difficult choices on whether they want to keep the DMA narrow and limited \u2014 or whether they want to make the DMU a dynamic tool to approach cloud services, AI and so on and so forth. And if they don\u2019t, it will come back to antitrust \u2014 which I will love because that will bring lots of fantastic cases to me. But that might not be the most efficient. So there\u2019s a very important strategic choice to be made here on the future of the DMA.\u201d<\/span><\/p>\n Much of the Commission\u2019s mindshare is clearly taken up by the demand to get the DMA\u2019s engine started and the car into first gear \u2014 as it kicks off its new role enforcing on the six designated gatekeepers, beginning March 7.<\/p>\n Also speaking at the one-day conference and giving a hint of what\u2019s to come here in the near term, Alberto Bacchiega, a director of platforms at DG Comp, suggested some of the DMA compliance proposals presented by gatekeepers so far don\u2019t comply with the law. \u201cWe will need to take action on those relatively quickly,\u201d he added, without offering details of which proposals (or gatekeepers) are in the frame there.<\/p>\n At the same time, and also with an air of managing expectations against any big bang enforcement moment dropping on Big Tech in a little over a month\u2019s time, Bacchiega emphasized that the DMA is intended to steer gatekeepers into an ongoing dialogue with platform stakeholders \u2014 where complaints can be aired and concessions extracted, will be the hope \u2014 noting that all the gatekeepers have been invited to explain their solutions in a public workshop that will take place a few weeks after March 7 (i.e. in addition to handing in their compliance reports to the Commission for formal assessment).<\/p>\n \u201cWe hope to have good conversations,\u201d he said. \u201cIf a gatekeeper proposes certain solution they must be convinced that these are good solutions \u2014 and they cannot be in a vacuum. They must be convinced and convincing. So that\u2019s the only way to be convincing. I think it\u2019s an opportunity.\u201d<\/p>\n How quickly could the Commission arrive at a non-compliance DMA decision? Again, there was no straight answer from the EU side. But Bacchiega said if there are \u201celements\u201d of gatekeeper actions the EU thinks are not complying \u201cwith the letter and the spirit of the DMA\u201d then action \u201cneeds to be very quick\u201d. That said, an actual non compliance investigation of a gatekeeper could take the EU up to 12 months to establish a finding, or six months for preliminary findings, he added.<\/p>\n<\/p><\/div>\nUS enforcers take aim at AI<\/h2>\n
EU takes stock of Big Tech<\/h2>\n