Sunday, November 17, 2024

Amazon-Anthropic Merger Investigated by UK Government

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The U.K. government has launched a preliminary investigation into the partnership between Amazon and Anthropic to see if it will significantly lessen competition. This comes days after a similar probe was announced into Alphabet’s collaboration with the AI startup.

In March, Amazon concluded its $4 billion (£3.16 billion) investment in Anthropic, the company behind the Claude LLM family, some of the only viable competitors to OpenAI’s ChatGPT and Google’s Gemini. It was founded by former OpenAI employees, including siblings Daniela and Dario Amodei, who were both execs.

In return for the investment, Anthropic committed to using Amazon Web Services as its primary cloud provider for “mission critical workloads, including safety research and future foundation model development.” It also agreed to use Amazon’s Trainium and Inferentia chips to build, train, and deploy its models and host them on the AI app development platform Amazon Bedrock.

However, the Competition and Markets Authority believes that this partnership could result in a “substantial lessening of competition” within the U.K. tech markets. It will now take until Oct. 4 to make its so-called “Phase 1” decision on whether the merger warrants a full “Phase 2” investigation or whether it is cleared of competition-related concerns.

If the CMA discovers cause for concern that may lead to a Phase 2 referral, Amazon will be given the opportunity to “offer undertakings to try to resolve (them).”

SEE: UK Regulator Checking Microsoft and Inflection AI Hires for ‘Merger Situation’

An Anthropic spokesperson told TechRepublic in an emailed statement, “We are an independent company. Our strategic partnerships and investor relationships do not diminish our corporate governance independence or our freedom to partner with others.

“Amazon does not have a seat on Anthropic’s board, nor does it have any board observer rights. We intend to cooperate with the CMA and provide them with a comprehensive understanding of Amazon’s investment and our commercial collaboration.”

An Amazon spokesperson told TechRepublic in an emailed statement, “We’re disappointed that the UK’s Competition and Markets Authority (CMA) has not ended its probe yet. Amazon’s collaboration with Anthropic does not raise any competition concerns or meet the CMA’s own threshold for review.

“The early days of generative AI have largely seen one successful option available for customers. Anthropic has worked hard to become an emerging viable alternative. But, building models is expensive, and companies like Anthropic need access to a substantial amount of capital to train these models. By investing in Anthropic, Amazon, along with other companies, is helping Anthropic expand choice and competition in this important technology.

“Amazon holds no board seat nor decision-making power at Anthropic, and Anthropic is free to work with any other provider (and indeed has multiple partners). Amazon will also continue to make these Anthropic models available to customers via Amazon Bedrock, a service that makes it easier for developers and companies to leverage large language models (LLMs) and build generative AI applications.”

Other CMA investigations

Last month, the CMA launched an investigation into the partnership that Google’s parent company, Alphabet, had initiated with Anthropic. Google agreed to invest up to $2 billion in the AI safety and research startup in October and also received a 10% stake in return for a $300 million injection from late 2022.

Microsoft is also in the hot seat. The government authority has another open Phase 1 inquiry into whether its hiring of Inflection AI co-founder Mustafa Suleyman and “several” coworkers should be considered anti-competitive. It is also looking into whether the connections between Microsoft and OpenAI open up the possibility of a merger, which could impact competition.

SEE: Regulator CMA to Scrutinize Microsoft and Other Cloud Service Providers in the UK

The CMA concluded its investigation into Microsoft’s Azure partnership with French AI startup Mistral in May, which involved the tech giant receiving a minority stake in exchange for all Mistral LLMs to be hosted on Azure. It was determined that the deal would not substantially reduce competition or harm consumers.

Why is the CMA investigating Big Tech firms?

Big Tech firms are rapidly investing in young AI startups to gain early control and capitalise on the AI boom. Notably, this can be seen through partnerships such as Microsoft and OpenAI, NVIDIA and Inflection AI, and Google and Anthropic.

However, such collaborations can lead to market dominance, making it more difficult for other independent companies to get funding, attract talent, or compete with the advanced technology and reach of the big players.

Complete mergers and acquisitions often trigger extensive regulatory scrutiny and potential antitrust actions for this reason, which can delay or block proceedings. To avoid this situation, Big Tech instead makes strategic investments in the most promising startups and hires their top talent, allowing them to gain influence and access to innovative technologies unchecked.

In an April report on how the CMA is looking into AI foundational models, the CMA said, “Without fair, open, and effective competition and strong consumer protection, underpinned by these principles, we see a real risk that the full potential of organisations or individuals to use AI to innovate and disrupt will not be realised, nor its benefits shared widely across society.

“That is why we have set out the underlying principles that we consider critical to safeguard those conditions. It is essential for competition agencies to work with market participants and other interested stakeholders to shape these positive outcomes.”

SEE: Delaying AI’s Rollout in the U.K. by Five Years Could Cost the Economy £150+ Billion, Microsoft Report Finds

The CMA is looking to identify “relevant merger situation(s)” that allow large tech companies to “shield themselves from competition” in the U.K. It says that “a range of different kinds of transactions and arrangements” could represent a relevant merger with the provisions of the Enterprise Act 2002.

The Digital Markets, Competition, and Consumers Bill that was passed in May also “anticipates new powers for the CMA.” According to the April report, the CMA can “enforce consumer protection law against infringing firms” and apply non-compliance penalties of up to 10% of a firm’s worldwide turnover.

“We are ready to use these new powers to raise standards in the market and, if necessary, to tackle firms that do not play by the rules through enforcement action,” it said.

Furthermore, in July, the CMA released a joint statement with the European Commission, U.S. Department of Justice, and U.S. Federal Trade Commission, where they committed to studying whether the AI industry allows for sufficient competition.

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