Like competition regulators in other parts of the world, the Competition Commission of India (CCI) has decided to look at the impact that the implementation of artificial intelligence (AI) tools could have on markets.
It has initiated the process of commissioning a third party to research the latest developments and provide information that will support it gain a comprehensive understanding of the evolving AI landscape and the application of AI in markets in India. Such contributions will shape the Commission’s strategies to support innovation and fair competition.
The regulator is concerned that artificial intelligence could become a key source of competitive advantage for a wide range of sectors, fundamentally changing the way companies make decisions, in particular by generating predictive analytics, automating decision-making and optimizing business processes. “The growing utilize of artificial intelligence across industries has raised recent questions about its impact on competitive dynamics in markets,” the regulator said in a tender document inviting agencies to apply for a mandate to conduct the study.
The Commission noted that while the transformative capabilities of AI have significant pro-competitive potential, concerns may arise regarding the potential risks to competition arising from its utilize. It said the proposed study would be a knowledge-building exercise aimed at gaining an in-depth understanding of emerging competitive dynamics in AI system development ecosystems and the implications of AI applications for competition, performance and innovation in key user industries, the tender document said.
Earlier this year, the European Commission called on stakeholders to share their experiences and provide feedback on the impact of artificial intelligence tools on competition and how competition law must respond. The Organization for Economic Co-operation and Development (OECD) has also focused on the impact of artificial intelligence on competition in recent years.
Mint looks at the competition regulator’s concerns about the increasing deployment of artificial intelligence.
What will the study focus on?
The tender document published by CCI stated that the study will focus on all aspects related to competition in artificial intelligence ecosystems (including generative artificial intelligence ecosystems) and the potential impact of the application of artificial intelligence on competition, efficiency and innovation in key user industries. This includes understanding the role that AI plays in shaping consumer behavior and demand drivers, as well as the impact of AI technologies on entry and exit barriers, market concentration, incentives for innovation and the market power of companies.
What does CCI hope to achieve with the study?
CCI expects the study to support it understand key AI systems and their ecosystem, including stakeholders, necessary inputs/resources, value chains, market structures and competitive parameters. The study is expected to examine the scope and nature of AI applications and assess their opportunities, risks and competitive implications.
CCI hopes that the study will support it determine what its priorities should be for enforcing and supporting AI and its applications in markets, and will also support it understand the existing and evolving regulatory/legal framework governing AI systems and applications in India and elsewhere major jurisdictions.
How can artificial intelligence impact competition?
Companies can utilize AI to effectively collude to maximize profits or to compete aggressively. The OECD’s 2021 Business and Finance Forecast, which focuses on AI in business and finance, notes that the utilize of AI to support and automate business decisions has the potential to “ usher in a recent era of competitive dynamics in markets. With this recent era may come competitive harm from collusion, abuse by dominant firms or mergers.”
Collusion refers to any form of coordination or agreement between competing companies with the goal of increasing profits to a level higher than that of competitors. Although price fixing is quite common in many sectors, the agreements may involve dividing different market segments between competitors in terms of product quality or overall production, or even harmonizing the terms offered to consumers. For example, in the cement market, producers may collectively agree to raise prices when demand is high, or they may decide to carve out markets in a mutually beneficial manner.
There is a fear that with the implementation of artificial intelligence, cases of collusion between gigantic companies operating in multiple markets will not only raise, but also become more rewarding for them. This is because AI can quickly detect deviations from collusion and deploy algorithms to take action if the agreement is followed. Companies must communicate with each other to implement collusion, but can utilize price signals.
Cartelization and collusion became complex for businesses as regulators kept a close eye on markets and industry associations. They would be wary of collusive messages for fear of being caught by the regulator and penalized.
E-commerce companies have benefited from the large-scale implementation of artificial intelligence – they are able to quickly respond to changes in markets and adjust their prices to the competition.
For consumers, enterprise adoption of AI may prove to be a mixed bag. Increased competition between companies can provide consumers with good deals, but collusion will often mean higher prices and/or restricted choice.
Does India regulate the utilize of artificial intelligence?
On March 15, 2024, the Ministry of Electronics and Information Technology issued an amended recommendation on the regulation of the utilize of artificial intelligence. The original recommendation sparked controversy over requirements such as obtaining government approval to deploy untested generative AI tools. The revised guidance removes this requirement but recommends that companies label AI-generated content appropriately. The guide lists measures that companies implementing artificial intelligence should follow to limit the creation of deepfakes and disinformation.
