France: Issued Competition Authority report following market inquiry into competition in the Generative Artificial Intelligence Sector

On 28 June 2024, France's Competition Authority released a report following an inquiry into the competitive dynamics within the Generative Artificial Intelligence (AI) Sector. The inquiry assessed the strategies of major digital companies, particularly their efforts to consolidate market power in the early stages of the generative AI value chain, including the design, training, and fine-tuning of large language models (LLMs). The report also addresses the role of these companies in cloud infrastructure, examining issues related to access to computing power, data, and skilled personnel. Additionally, the inquiry highlighted the investments and partnerships formed by these companies, especially with innovative firms specialising in generative AI. While the focus was primarily on upstream market activities, the Authority noted the need for future analysis of AI's broader economic impacts. Recommendations were made to enhance competition without necessitating new legislation, suggesting improvements to the regulatory framework, advocating for the use of competition law tools in case of market harm, and calling for increased transparency in digital giants' investments. The report also addressed the high barriers to entry in the sector, including the need for specialised AI chips, the pivotal role of cloud services, the critical importance of data volume, the scarcity of skilled professionals, and the substantial financial requirements for entering the market. The Authority's findings underscored the competitive risks posed by the dominant positions of major digital companies, including potential abuses by chip providers, risks of lock-in by major cloud service providers, challenges related to data access, concerns over skilled workforce access, and the implications of minority investments and partnerships.