UK competition regulator looks into Amazon’s Anthropic funding

The Competition and Markets Authority (CMA) has begun looking at whether it should investigate Amazon’s partnership with Anthropic under the merger provisions of the Enterprise Act 2002.

The CMA is already looking at Anthropic’s partnership with Google owner Alphabet, as well as Microsoft’s partnership with Inflection.

In October 2023, Alphabet invested $2bn in OpenAI rival Anthropic. The artificial intelligence (AI) startup has also received $4bn funding from Amazon.

In the US, the Federal Trade Commission has also begun looking at the multibillion-dollar investments that Microsoft made into OpenAI, as well as investments in Anthropic by Amazon and Google.

In April 2024, the CMA invited interested third parties to give their views on whether the partnership between Microsoft and Mistral AI, the partnership between Amazon and Anthropic, and Microsoft’s hiring of former employees and related arrangements with Inflection AI, fall within UK merger rules and the impact these arrangements could have on competition in the UK.

Alex Haffner, competitions partner at law firm Fladgate, described the CMA’s latest move as “the next of a series of cases being run by competition authorities globally into tie-ups between big tech and innovative AI scaleups based on concerns around control of the fast-moving and evolving AI sector”.

The CMA’s AI foundation models: technical update, published in April 2024, reported that the growing presence across the foundation model value chain of a small number of incumbent technology firms, which already hold positions of market power in many of today’s most important digital markets, could profoundly shape foundation model-related markets to the detriment of fair, open and effective competition. The report’s authors warned that this could ultimately harm businesses and consumers, such as by reducing choice and quality, and raising prices, for example.

The technical update identified Google, Amazon, Microsoft, Meta, Apple and Nvidia as the major firms that have created “an interconnected web” of partnerships with several AI startups. 

In general, funding from the major tech firms provides these startups with access to the cloud compute and graphics processing unit AI acceleration hardware and the immense datasets the tech giants have at their disposal for training and running AI inference applications. Along with the AI firms already mentioned, the startups identified in the report include Adept AI, AI21 Labs, Cohere, Contextual AI, Falcon LLM, Hugging Faces, InstaDeep, Midjourney, Perplexity AI, Recursion, Runway AI and Stability AI. 

“In all, it appears that most of these partnerships did not involve an acquisition of a stake of 50% or more in the foundation model partner, though the detail of different partnership arrangements may vary,” the CMA report stated. 

Fladgate’s Haffner added: “The fact that the CMA is going to be looking in depth at this particular transaction will doubtless again bring up a debate, which is ongoing, as to how far competition regulators should go to intervene in the AI space at such a crucial time for its overall development.”