UK government investigates Amazon-Anthropic merger

The UK government has launched a preliminary investigation into the Amazon-Anthropic partnership to see if it significantly reduces competition, days after announcing a similar investigation into Alphabet’s partnership with the AI ​​startup.

In March, Amazon completed a $4bn (£3.16bn) investment in Anthropic, the company behind Claude LLM’s family, one of the few real competitors to OpenAI’s ChatGPT and Google’s Gemini. It was founded by former OpenAI employees, including siblings Daniela and Dario Amodei, who were directors.

In exchange for the investment, Anthropic agreed to use Amazon Web Services as its primary cloud provider for “mission-critical workloads, including security research and development of future foundational models.” It also agreed to use Amazon’s Trainium and Inferentia chips to build, train, and deploy its models, and host them on Amazon’s Bedrock AI application development platform.

However, the Competition and Markets Authority believes the collaboration could result in a “significant lessening of competition” in UK tech markets. It will now take until 4 October to make a so-called “Phase 1” decision to determine whether the merger warrants a full “Phase 2” investigation or will be cleared of competition concerns.

If the CMA identifies a cause for concern that could lead to the case being referred to Phase 2, Amazon will have the opportunity to “offer commitments designed to address (that) concern”.

SEE: UK regulator investigates Microsoft and Inflection AI employment 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 impair our independence in corporate governance 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 work with the CMA to ensure they have a comprehensive understanding of Amazon’s investment and our commercial relationship.”

An Amazon spokesperson told TechRepublic in an emailed statement: “We are disappointed that the UK Competition and Markets Authority (CMA) has not yet concluded its investigation. Amazon’s relationship with Anthropic does not raise any competition concerns and does not meet the CMA’s own threshold for review.

“The early days of generative AI largely showed that customers had access to one successful option. Anthropic has worked hard to become an emerging, viable alternative. But building models is expensive, and companies like Anthropic need access to significant amounts of capital to train those models. By investing in Anthropic, Amazon, along with others, is helping Anthropic expand choice and competition in this important technology.

“Amazon has no board seat or decision-making authority in Anthropic, and Anthropic is free to partner with any other vendor (and in fact has many 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 companies to leverage large language models (LLMs) and build generative AI applications.”

Other CMA investigations

Last month, the CMA opened an investigation into the partnership that Google parent company Alphabet had forged with Anthropic. Google agreed to invest up to $2 billion in the AI ​​security and research startup in October, and also received a 10% stake in exchange for an injection of $300 million from the end of 2022.

Microsoft is also in the hot seat. Government authorities are conducting another open Phase 1 investigation into whether the hiring of Inflection AI co-founder Mustafa Suleyman and “several” associates should be considered anticompetitive. They are also examining whether Microsoft’s ties to OpenAI open up the possibility of a merger that could affect competition.

SEE: CMA regulator to investigate Microsoft and other cloud providers in UK

The CMA concluded its investigation into Microsoft’s partnership with French AI startup Mistral in May, in which the tech giant received a minority stake in exchange for hosting all of Mistral’s LLM on Azure, finding the deal would not significantly lessen competition or harm consumers.

Why is the CMA investigating big tech companies?

Big Tech companies are rapidly investing in young AI startups to gain early control and capitalize on the AI ​​boom. Interestingly, this can be seen through partnerships like Microsoft and OpenAI, NVIDIA and Inflection AI, and Google and Anthropic.

However, this type of collaboration can lead to market dominance, making it harder for other independent companies to obtain financing, attract talent or compete with the advanced technology and reach of the big players.

Full-blown mergers and acquisitions often generate extensive regulatory scrutiny and potential antitrust action for this reason, which can delay or block the proceedings. To avoid this situation, Big Tech instead makes strategic investments in the most promising startups and hires their best talent, allowing them to gain influence and access to innovative technologies without scrutiny.

In an April report on how the CMA is investigating fundamental AI 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 for organisations or individuals to use AI to innovate and drive change will not be realised, and its benefits will not be shared widely across society.

“That’s why we’ve set out the ground rules we believe are critical to protecting these conditions. It’s essential that competition agencies work with market participants and other stakeholders to shape these positive outcomes.”

SEE: Microsoft report reveals delaying AI adoption in the UK by five years could cost the economy over £150 billion

The CMA is seeking to identify “material merger situations” that allow big tech companies “protection from competition” in the UK. It says that “a range of different types of transactions and arrangements” could constitute a material merger under the Enterprise Act 2002.

The Digital Markets, Competition and Consumer Act, which was passed in May, “also provides new powers for the CMA”. According to a report in April, the CMA can “enforce consumer protection laws against companies that break the law” and impose fines for non-compliance of up to 10% of a company’s global turnover.

“We stand ready to use these new powers to raise standards in the market and, if necessary, take enforcement action against companies that fail to comply with the rules,” the statement said.

Additionally, in July, the CMA issued a joint statement with the European Commission, the US Department of Justice and the US Federal Trade Commission in which it committed to investigating whether the AI ​​industry provides sufficient competition.