In the era of digital technology, it is natural to contemplate the potential effects of the digital revolution on various aspects of life. Generative AI, although still in its development stage, is already causing the anticipated revolution in the markets. Generative AI is beginning to revolutionize the delivery of services and products and has already made significant strides in transforming how markets operate. It is not yet clear whether generative AI will cause competition law issues; however, based on experience with digital revolutions, it is worth noting that a few scenarios are possible that will disrupt the current competition law framework everywhere, including in North Macedonia.
It is undeniable that developing generative AI takes a lot of resources, quality datasets, and computational power. This contributes to making the generative AI market a high entry barrier market. This is characterized by market concentration and the emergence of dominant players. The Macedonian Law on Protection of Competition prescribes fair competition for all enterprises and prohibits companies from engaging in conduct that will distort the competitive process and harm market competition. Because it is a high-barrier market, it could hinder smaller companies and smaller entities from effectively competing – especially considering the relatively limited resource pool of local companies in North Macedonian compared to global giants.
Generative AI uses large quantities of data to perfect its performance, thus creating a real possibility for market dominance. If generative AI becomes widely adopted and used in North Macedonia, it could make it very difficult for competitors to attract users or even reach a similar level of performance. This can lead to consumer lock-in due to the fact that consumers may become heavily reliant on a specific generative AI model, making it very hard to switch to other alternative language AI models. The users can be locked in in a particular artificial intelligence ecosystem, reducing their abilities to work with competitors, which will contribute to further solidifying the dominant market position of the already established players.
Moreover, companies investing in artificial intelligence and developing similar models to generative AI may seek to protect their intellectual property rights. This can further enhance market dominance, since the other entities may be restricted or prohibited from developing artificial intelligence models like generative AI. This can hinder the entry of new players and ensure market dominance of the already existing companies. Even if companies are permitted to develop similar artificial intelligence models, it is undisputed that developing artificial intelligence requires many datasets with vast information. This further raises the question of access to various and extensive datasets. Companies with exclusive access to datasets may establish dominance and data monopolies, which will adversely affect other possible market players that do not have access to information.
Furthermore, generative AI may facilitate concluding collusive agreements between market players. Collusive agreements are non-competitive agreements attempting to disrupt the market’s equilibrium in the supply of goods and/or services. Collusive agreements may also happen due to the possibility of market price fixing because of generative AI. Generative AI and similar artificial intelligence instruments may automatically generate pricing recommendations or prescribe set prices based on the condition of the market in question. If multiple market players adopt the AI’s recommendations, that could lead to tacit collusive agreements where the players will adopt and fix the same price without independent decision-making. This may accelerate collusive decision-making, even without prior agreements.
To mitigate the abovementioned risks, the Macedonian competition authority and regulatory bodies everywhere should pay close attention to generative AI’s impact on competition. They should explore whether and how the existing competition regulations can be applied to artificial intelligence (there are no specific competition regulations that would apply to AI in North Macedoniat) and what new regulations are needed to ensure adequate coverage of all potential scenarios regarding competition issues in artificial intelligence. The Macedonian competition authority should ensure monitoring and detection and remain vigilant to adequately adapt to the possible emergence of competition law issues in artificial intelligence, thus maintaining fair market practices.
By Gjorgji Georgievski, Partner, and Hristina Mihajloska, Associate, ODI Law