FMs are versatile AI systems with the potential to revolutionise various sectors, from information access to healthcare. The CMA’s report, published today, outlines a set of guiding principles aimed at safeguarding consumer protection and fostering healthy competition within this burgeoning industry.

Foundation models – known for their adaptability to diverse applications – have witnessed rapid adoption across various user platforms, including familiar names like ChatGPT and Office 365 Copilot. These AI systems possess the power to drive innovation and stimulate economic growth, promising transformative changes across sectors and industries.

Sarah Cardell, CEO of the CMA, emphasised the urgency of proactive intervention in the AI:

“The speed at which AI is becoming part of everyday life for people and businesses is dramatic. There is real potential for this technology to turbocharge productivity and make millions of everyday tasks easier – but we can’t take a positive future for granted.

That’s why we have today proposed these new principles and launched a broad programme of engagement to help ensure the development and use of foundation models evolves in a way that promotes competition and protects consumers.

While I hope that our collaborative approach will help realise the maximum potential of this new technology, we are ready to intervene where necessary.”

Research from Earlybird reveals that Britain houses the largest number of AI startups in Europe. The CMA’s report underscores the immense benefits that can accrue if the development and use of FMs are managed effectively.

These advantages include the emergence of superior products and services, enhanced access to information, breakthroughs in science and healthcare, and even lower prices for consumers. Additionally, a vibrant FM market could open doors for a wider range of businesses to compete successfully, challenging established market leaders. This competition and innovation, in turn, could boost the overall economy, fostering increased productivity and economic growth.

Claire Trachet, tech industry expert and CEO of business advisory Trachet, said:

“With the [UK-hosted] global AI Safety Summit around the corner, the announcement of these principles shows the public and investors that the UK is committed to regulating AI safely. To continue this momentum, it’s important for the UK to strike a balance in creating effective regulation without stifling growing innovation and investment. 

Ensuring that regulation is both well-designed and effective will help attract and maintain investment in the UK by creating a stable, secure, and trustworthy business environment that appeals to domestic and international investors.” 

The CMA’s report also sounds a cautionary note. It highlights the potential risks if competition remains weak or if developers neglect consumer protection regulations. Such lapses could expose individuals and businesses to significant levels of false information and AI-driven fraud. In the long run, a handful of dominant firms might exploit FMs to consolidate market power, offering subpar products or services at exorbitant prices.

While the scope of the CMA’s initial review focused primarily on competition and consumer protection concerns, it acknowledges that other important questions related to FMs, such as copyright, intellectual property, online safety, data protection, and security, warrant further examination.

Sridhar Iyengar, Managing Director of Zoho Europe, commented:

“The safe development of AI has been a central focus of UK policy and will continue to play a significant role in the UK’s ambitions of leading the global AI race. While there is public concern over the trustworthiness of AI, we shouldn’t lose sight of the business benefits that it provides, such as forecasting and improved data analysis, and work towards a solution.

Collaboration between businesses, government, academia and industry experts is crucial to strike a balance between safe regulations and guidance that can lead to the positive development and use of innovative business AI tools.

AI is going to move forward with or without the UK, so it’s best to take the lead on research and development to ensure its safe evolution.”

The proposed guiding principles, unveiled by the CMA, aim to steer the ongoing development and use of FMs, ensuring that people, businesses, and the economy reap the full benefits of innovation and growth. Drawing inspiration from the evolution of other technology markets, these principles seek to guide FM developers and deployers in the following key areas:

• Accountability: Developers and deployers are accountable for the outputs provided to consumers.
• Access: Ensuring ongoing access to essential inputs without unnecessary restrictions.
• Diversity: Encouraging a sustained diversity of business models, including both open and closed approaches.
• Choice: Providing businesses with sufficient choices to determine how to utilize FMs effectively.
• Flexibility: Allowing the flexibility to switch between or use multiple FMs as needed.
• Fairness: Prohibiting anti-competitive conduct, including self-preferencing, tying, or bundling.
• Transparency: Offering consumers and businesses information about the risks and limitations of FM-generated content to enable informed choices.

Over the next few months, the CMA plans to engage extensively with a diverse range of stakeholders both within the UK and internationally to further develop these principles. This collaborative effort aims to support the positive growth of FM markets, fostering effective competition and consumer protection.

Gareth Mills, Partner at law firm Charles Russell Speechlys, said:

“The principles themselves are clearly aimed at facilitating a dynamic sector with low entry requirements that allows smaller players to compete effectively with more established names, whilst at the same time mitigating against the potential for AI technologies to have adverse consequences for consumers.

The report itself notes that, although the CMA has established a number of core principles, there is still work to do and that stakeholder feedback – both within the UK and internationally – will be required before a formal policy and regulatory position can be definitively established.

As the utilisation of the technologies grows, the extent to which there is any inconsistency between competition objectives and government strategy will be fleshed out.”

An update on the CMA’s progress and the reception of these principles will be published in early 2024, reflecting the authority’s commitment to shaping AI markets in ways that benefit people, businesses, and the UK economy as a whole.

(Photo by JESHOOTS.COM on Unsplash)

See also: UK to pitch AI’s potential for international development at UN

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Nvidia announced plans to acquire Cambridge-based Arm back in September 2020 in a deal worth $40 billion. As two of the biggest names in chip manufacturing, the deal naturally caught the attention of competition regulators around the world.

In November 2021, UK Digital Secretary Nadine Dorries decided to block the merger pending the results of a 24-week ‘Phase 2’ investigation.

Wouldn’t an IPO be an alternative to all of this?

Arm has been struggling from relatively flat revenues and rising costs despite the huge success of the company’s licensees such as Apple, Qualcomm, and Amazon. Arm’s current owner, SoftBank, considered and subsequently rejected the idea of pursuing an IPO (Initial Public Offering) of the company in 2019 and again in early 2020.

Simon Segars, CEO of Arm, explained: “We contemplated an IPO but determined that the pressure to deliver short-term revenue growth and profitability would suffocate our ability to invest, expand, move fast, and innovate.”

In addition, Arm’s largest market, mobile, is saturated and it could be difficult for Arm to crack the datacentre and PC markets in the face of strong incumbents like Intel and AMD that have established ecosystem of developers, software, systems, and peripherals, and profits that enable them to make large R&D investments.

“These observations are not criticisms of Arm’s technology or engineering team. Arm has great engineering talent in the areas where it focuses. But as a standalone IP licensing business, and without access to further capital, Arm has inherent scale, scope, and economic limitations that would impact Arm’s future as a standalone licensing firm,” reads the response.

Addressing competition concerns

Nvidia believes that its acquisition would provide Arm with the resources to move forward in the face of limited options. Capital markets. meanwhile, would expect Arm to cut costs to maximise the company’s value.

“Nvidia is particularly concerned that these pressures would drive Arm to deprioritize datacenter and PC and to instead focus on its core mobile and growing IoT businesses. The result would be a concentrated CPU market largely controlled by Intel/AMD (x86),” the response continues.

The company goes on to say that soaring profits for Arm’s customers are not a win for the company or for competition. Nvidia argues the “industry titans will be powerful and competitive, no matter what path Arm takes” and “the question at hand is whether regulators will approve the transaction and allow Arm to take the steps needed to enable others to compete.”

Nvidia highlights that it was SoftBank that approached the company about the potential of acquiring Arm rather than the other way around. Nvidia says it will continue to support x86 as it has a vested interest – building platforms such as Omniverse on such systems – but thinks that it can help Arm build a viable alternative ecosystem that will increase options and encourage the x86 giants to innovate.

Arm’s future as a British tech icon

From the UK’s perspective, another major concern was the impact on jobs and even the company’s future in the country. Hermann Hauser, the founder of Arm, once suggested the acquisition would be “surrendering the UK’s most powerful trade weapon to the US”.

In a binding offer, Nvidia committed to expanding Arm’s engineering teams in the UK—including a pledge to create a new group dedicated to creating purpose-built CPU IP for datacentres and PCs.

Nvidia chose to build its Cambridge-1 supercomputer in the UK, which was seen by many as a bid to show its commitment to the country. The firm also opened a new AI centre in Cambridge—home to an increasing number of exciting startups in the field such as FiveAI, Prowler.io, Fetch.ai, and Darktrace.

“We will create an open centre of excellence in the area once home to giants like Isaac Newton and Alan Turing, for whom key Nvidia technologies are named,” said Nvidia CEO Jensen Huang at the time.

“Here, leading scientists, engineers and researchers from the UK and around the world will come to develop their ideas, collaborate and conduct their ground-breaking work in areas like healthcare, life sciences, self-driving cars, and other fields.”

No incentive to foreclose

The final major concern around the acquisition is that the merged entities will refuse or restrict the licensing of future IP to give Nvidia a competitive advantage.

Nvidia points to the emergence of RISC-V and other alternatives to Arm that could become preferable “if the Merged Entity were to refuse to license future datacenter IP as soon as it can”. However, it says that would be many years down the road as “customers already have the IP in their possession, and it will be many years before their contracts are up for renewal”.

Furthermore, Nvidia says that it would have no economic incentive to foreclose:

“NVIDIA knows that such a strategy would be self-defeating, and has no incentive to pursue it. The Decision does not explain why any downstream customer would embrace a sole-source ecosystem. Even x86 has always had two bona fide suppliers (Intel and AMD), and now, x86 is licensable to anyone.”

It also says that Arm’s customers are Nvidia’s customers and any attempt to foreclose would damage its own business and reputation.

While regulators have been mulling whether or not to approve the deal, Nvidia says that Arm’s competition has been exploiting the delay to continue expanding their offerings.

Nvidia makes some fairly solid arguments in its response, but whether they’re enough to woo regulators is another question. It’s not just the UK’s regulator examining the deal, but also respective agencies from the US, China, and EU.

(Photo by Mika Baumeister on Unsplash)

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