The UK government has launched a preliminary investigation into the partnership between Amazon and Anthropic to see if it will significantly reduce competition. This comes days after a similar investigation was announced into Alphabet’s collaboration with the artificial intelligence startup.
In March, Amazon concluded its $4bn (£3.16bn) investment in Anthropic, the company behind the Claude family-owned LLM, one 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 executives.
In exchange for the investment, Anthropic committed to using Amazon Web Services as its primary cloud provider for “mission-critical workloads, including security 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 Amazon Bedrock AI application development platform.
However, the Competition and Markets Authority believes the tie-up could lead to a “substantial reduction in competition” in UK tech markets. The so-called “Phase 1” decision on whether the merger warrants a full “Phase 2” investigation or is cleared of competition concerns will now be made on 4 October.
If the CMA finds grounds for concern that could lead to a referral to Phase 2, Amazon will have the opportunity to “offer engagements to try to address them”.
SEE: UK regulator investigates Microsoft and Inflection AI hiring over '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 or any board observation rights. We intend to cooperate with the CMA and provide them with a comprehensive understanding of Amazon’s investment and our business collaboration.”
An Amazon spokesperson told TechRepublic in an emailed statement: “We are disappointed that the UK's Competition and Markets Authority (CMA) has not yet completed its investigation. Amazon's collaboration with Anthropic does not raise any competition concerns nor does it meet the CMA's own threshold for review.
“In the early days of generative AI, customers had only one successful option available to them. Anthropic has worked hard to become a viable emerging alternative. However, 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 has no board seat or decision-making power at Anthropic, and Anthropic is free to work with any other vendor (and indeed has multiple partners). Amazon will also continue to make these Anthropic models available to customers through Amazon Bedrock, a service that makes it easy for developers and businesses 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 parent company Alphabet had entered into with Anthropic. Google agreed to invest up to $2 billion in the AI research and security startup in October and also received a 10% stake in exchange for a $300 million injection starting in late 2022.
Microsoft is also in the crosshairs. The government authority has another Phase 1 investigation open into whether the hiring of Inflection AI co-founder Mustafa Suleyman and “several” co-workers should be considered anti-competitive. It is also investigating whether the connections between Microsoft and OpenAI open the possibility of a merger, which could affect competition.
SEE: CMA to scrutinize Microsoft and other cloud service providers in the UK
The CMA concluded its investigation into Microsoft’s partnership with French AI startup Mistral on Azure in May, which involved the tech giant receiving a minority stake in exchange for all of Mistral’s LLMs being hosted on Azure. It found that the deal would not substantially reduce competition or harm consumers.
Why is the CMA investigating big tech companies?
Big tech companies are rapidly investing in AI startups to gain early control and capitalize on the AI boom. This can be seen in particular through partnerships such as Microsoft and OpenAI, NVIDIA and Inflection AI, and Google and Anthropic.
However, these collaborations can lead to market dominance, making it harder for other independent companies to obtain funding, attract talent or compete with the advanced technology and reach of the big players.
Completed 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 companies make strategic investments in the most promising startups and hire their best talents, allowing them to gain influence and access to innovative technologies without restrictions.
In an April report on how the CMA is analysing AI’s fundamental 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 the system will not be realised, nor will its benefits be shared widely across society.
“That is why we have set out the basic principles that we consider essential to safeguard these conditions. It is essential that competition authorities work with market participants and other stakeholders to shape these positive outcomes.”
SEE: Delaying AI deployment in the UK by five years could cost the economy more than £150bn, Microsoft report says
The CMA is seeking to identify “relevant merger situations” that would allow big tech companies to “protect themselves from competition” in the UK. It says that “a variety of different types of transactions and arrangements” could represent a relevant merger under the provisions of the Enterprise Act 2002.
The Digital Markets, Competition and Consumers Bill, passed in May, also “anticipates new powers for the CMA”. According to the April report, the CMA can “enforce consumer protection law against offending companies” and apply penalties for non-compliance of up to 10% of a company’s global turnover.
“We are prepared to use these new powers to raise standards in the market and, if necessary, to tackle companies that do not respect the rules with enforcement measures,” he said.
In addition, in July, the CMA published a joint statement with the European Commission, the US Department of Justice and the US Federal Trade Commission, in which they committed to studying whether the AI industry allows for sufficient competition.
