AI Integration within EU Competition Regulation Framework
The European Commission (EC) and other key competition regulators are actively assessing how AI-driven transactions could impact market dynamics and competitive fairness. This shift in focus comes as the rapid advancement of artificial intelligence (AI) technology is deeply embedded across key economic sectors, such as finance, manufacturing, retail, education, energy, and healthcare.
Currently, EU merger control faces challenges in capturing AI sector deals due to many not resulting in a lasting change of control or meeting the relevant revenue thresholds. The EC has scrutinised AI partnerships, such as collaborations between large tech companies and smaller AI developers, which often involve significant investments but do not necessarily trigger traditional merger control.
To address this issue, the EC is exploring ways to extend the concept of "control" to capture these types of deals. This was evident in the case of Microsoft's arrangements with OpenAI and Inflection, where the EC found that Microsoft's acquisition of Inflection's key personnel and a license to Inflection's key IP constituted a lasting change of control.
National competition authorities work closely with the EC to screen AI-related transactions and may apply different standards for assessing control and market impact. They are also involved in enforcing broader competition policies, including those related to emerging technologies like AI.
Looking ahead, several regulatory developments are expected to shape the landscape of AI-driven transactions. The European Union's AI Act, set to fully implement key provisions by August 2, 2025, will introduce comprehensive regulations for AI development and use. While not directly related to merger control, it will influence AI-related transactions by setting standards for innovation and compliance.
Another development is the EU Foreign Subsidies Regulation (FSR), which introduces additional oversight for M&A transactions involving foreign financial contributions, which may impact AI companies receiving such contributions.
The EC is also considering revisions to merger control that would allow it to formally evaluate a merger's benefits on innovation and strategic fields like AI. This could lead to more nuanced assessments of AI-driven transactions. There is also an increasing emphasis on global cooperation and understanding of evolving competition enforcement trends, particularly in sectors like AI.
In July 2024, the EC, the UK Competition and Markets Authority (CMA), the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) signed a joint statement on competition in generative AI foundation models and AI products. This move underscores the growing global collaboration in addressing competition issues in the AI sector.
In the UK, the CMA concluded that the broader partnership between Microsoft and OpenAI gave Microsoft material influence over OpenAI's commercial policy, but decided not to investigate the deal further because OpenAI was not commercializing any products in the UK at the time.
Some EU Member States may consider giving their competition authorities the "golden power" to review deals that do not meet merger notification thresholds. Denmark, Hungary, Italy, Latvia, Lithuania, Sweden, Iceland, and Norway can "call in" below-threshold deals for review.
As competition authorities adapt their frameworks to address the complexities of AI-driven transactions, they aim to ensure that regulations keep pace with technological advancements while maintaining fair competition. The ECJ's 2023 Towercast judgment allows EU national competition authorities to investigate non-notifiable acquisitions by dominant companies in the AI industry, providing a tool to tackle potential anti-competitive practices.
Global investment in AI surged to approximately USD 252 billion in 2024, representing a thirteen-fold increase since 2014. As the AI industry continues to evolve, competition authorities will need to strike a balance between promoting innovation and ensuring fair competition.
[1] European Commission (2023). Staff Working Document on the Preliminary Findings of the Public Consultation on the Future of EU Merger Control. [2] European Commission (2024). Competition Policy Brief: Potential Competition Issues in AI and Virtual Worlds. [3] European Parliament and the Council of the European Union (2023). Regulation (EU) 2023/1001 on the Establishment of a Framework for Artificial Intelligence, a Regulation on Corporate Sustainability Reporting, and an Amendment to Regulation (EU) 2019/2088 on Sustainability-Related Disclosures in the Financial Services Sector. [4] European Parliament and the Council of the European Union (2021). Regulation (EU) 2021/2283 on Foreign Subsidies Distorting the Internal Market. [5] European Commission (2023). Staff Working Document on the Preliminary Findings of the Public Consultation on the Future of EU Merger Control.
- The introduction of the European Union's AI Act, set to fully implement key provisions by August 2, 2025, will impact AI-related transactions, as it will introduce comprehensive regulations for AI development and use, influencing innovation and compliance in the AI industry.
- As global investment in AI continues to grow, reaching approximately USD 252 billion in 2024, competition authorities must strike a balance between promoting innovation and ensuring fair competition, with the aim of keeping regulations pace with technological advancements while maintaining fair competition.
