AI's New Legal Battleground: Navigating Market Dominance in the EU

by Kay Lee

Artificial intelligence (AI) is widely lauded for its transformative power, but its rise could spell challenges for enforcing competition law in the European Union. As AI systems continue to evolve with increasing autonomy and predictive capabilities, authorities recognize potential pitfalls, especially concerning the abuse of market dominance.

Redefining Dominance in a Digital Age

In the EU legal context, market dominance isn’t merely about size but the degree of independence a company possesses over competitors and consumers. With AI’s ability to autonomously infer and make decisions, defining dominance in this digital landscape becomes an intricate task.

Market definition is crucial in assessing dominance, yet it is particularly complex in the AI sector. The multifaceted nature of AI, which often relies on myriad interlinked technologies, makes any swift conclusions about a firm’s dominance precarious. Global power dynamics further entangle these assessments, as countries like the U.S. blaze the trail in AI, possibly overshadowing European ventures.

AI: A Double-Edged Sword in Competition

The potential for AI to disrupt traditional competition frameworks is immense. Authorities are increasingly vigilant about self-preferential practices where a dominant enterprise might engineer AI to prioritize its offerings over others’. Google’s €2.42 billion fine by the European Commission for such self-preferencing is emblematic of this concern. Similarly, allegations against Amazon highlight the potency of AI in pricing manipulation—whether through predatory tactics or nuanced price discrimination based on consumer data.

However, elucidating abuses remains demanding. To prove exploitative abuse, intricate elements must align, notably the frequent targeting of specific consumers without objective justifications, underscoring the formidable hurdle in crafting conclusive cases against AI giants.

Essential Inputs and AI’s Engine

The heart of AI systems lies in its essential inputs—data and IT components. As specialized AI technology components become indispensable, their restricted access could breed abusive market conduct. Access to vast datasets, often challenging under EU data protection laws, further accentuates disparities between industry behemoths and fledgling competitors.

An example lies in the AI chip market, where dominance can manifest through unyielding control over pivotal supplies. A narrative prevails where denying access, imposing discriminatory pricing, or bundling can profoundly undercut competitors, thereby warping market fairness and innovation.

Tying (mandating the purchase of additional goods) and bundling (offering bundled discounts) represent potential grounds for abuse. Cases like Microsoft’s alleged bundling of Teams with Office 365 underscore looming legal entanglements, attracting the EU’s scrutiny and prompting firms to propose commitments to mitigate competitive concern.

As the EU continues its intricate dance with AI and competition law, the stakes have never been higher. As stated in WilmerHale, AI’s march forward necessitates astute legal vigilance to balance innovation with equitable market practices, a narrative fitting this era of unprecedented technological acceleration.