As British Regulators Scrutinize Microsoft and Amazon AI Deals, Industry Braces for Impact

British antitrust authorities are soliciting opinions on the implications of partnerships between tech giants Microsoft and Amazon and smaller generative artificial intelligence (AI) model developers amid growing concerns about competition and innovation in the sector.

This inquiry could reshape the AI industry’s landscape. Some experts warned that a strict antitrust ruling may not only alter how major corporations interact with emerging AI firms but could also dampen enthusiasm for new partnerships, possibly stalling the pace of innovation.

“A direct ruling that prohibits exclusive partnerships or creates substantial barriers to building direct partnerships between generative AI companies and the major tech companies will likely make capital more difficult to obtain and would therefore slow their growth,” Ryan M. Yonk, a senior research faculty member at think tank The American Institute for Economic Research, told PYMNTS.

“A ruling that limits these partnerships would certainly create greater reluctance to attempt such partnerships and would likely cause a reevaluation of whether new startups will be able to get off the ground without them,” he added.

Growing Deals for Smaller AI Firms

The U.K.’s Competition and Markets Authority (CMA) is asking for input from stakeholders by May 9 to determine whether the business dealings in question should be classified as mergers. This request for comments is an initial step in the information-gathering phase, which precedes the start of a formal Phase 1 investigation by U.K. regulators. However, according to the CMA, this request does not initiate the formal review.

“Foundation Models have the potential to fundamentally impact the way we all live and work, including products and services across so many U.K. sectors — healthcare, energy, transport, finance and more,” Joel Bamford, executive director of mergers at the CMA, said in a news release.

“So open, fair and effective competition in Foundation Model markets is critical to making sure the full benefits of this transformation are realised by people and businesses in the U.K., as well as our wider economy where technology has a huge role to play in growth and productivity,” he continued.

Microsoft has invested 15 million euros ($16 million) in Mistral AI, an emerging French AI company founded by ex-employees of Meta and Google’s DeepMind. As part of the agreement, Mistral, recently valued at 2 billion euros ($2.14 billion), will make its advanced large language models (LLMs) available on Microsoft’s Azure cloud platform. Azure will be the second platform to host Mistral’s LLM technology, following OpenAI.

Meanwhile, Amazon has invested $4 billion in the U.S. AI company Anthropic, known for its LLM chatbot Claude. Amazon has stated it will keep a minority stake in Anthropic and not take a board position.

More Scrutiny

In recent years, concerns about the market dominance of large technology companies, mainly those heavily invested in AI, have led to increased scrutiny and anti-trust rulings.

In 2021, the European Commission investigated whether Google’s use of data for advertising constituted an abuse of its dominant market position. Similarly, the Federal Trade Commission (FTC) filed an antitrust lawsuit against Facebook in the United States, alleging that the company’s acquisitions of Instagram and WhatsApp aimed to eliminate potential competitors.

Rulings on competition are based on the belief that large companies can unfairly dominate the market, necessitating protection for new competitors, Yonk said.

“While this sentiment sounds good to the general public, it replaces questions about consumer welfare with questions about company welfare (especially the competing firms’ welfare) with the perverse result of helping competitors while leaving consumers worse off,” he said. “I would expect that a ruling that makes partnerships more difficult or disallows them will further embolden those looking to increase the regulation of competition and do little to make consumers better off.”