UK competition watchdog scrutinises Alphabet and Anthropic tie-up

The Competition and Markets Authority (CMA) is looking into whether Alphabet’s partnership with Anthropic is anti-competitive.

There appears to be an arms race going on in the tech sector for artificial intelligence (AI) talent and capabilities, which is leading the UK regulator to consider whether partnerships between major tech firms and AI startups are healthy for an open and competitive market.

In October 2023, Alphabet invested $2bn in OpenAI rival Anthropic. The AI startup has also received $4bn funding from Amazon.

In a second-quarter earnings call, Alphabet CEO Sundar Pichai said the company was broadening support for third-party models, including Anthropic’s Claude 3.5 Sonnet and open source models like Gemma 2, Llama and Mistral.

The CMA has been investigating how the tech giants are exerting influence in AI by funding AI startups, whose services are then made available on their public cloud infrastructure. 

In April 2024, the CMA invited interested third parties to give their views on whether the partnerships between Microsoft and Mistral AI, and Amazon and Anthropic, as well as Microsoft’s hiring of former employees and related arrangements with Inflection AI, fall within UK merger rules.

At the time, the CMA’s executive director of mergers, Joel Bamford, said: “Open, fair and effective competition in foundation model markets is critical to making sure the full benefits of this transformation are realised by people and businesses in the UK, as well as our wider economy where technology has a huge role to play in growth and productivity.”

As an industry, we should be cautious over powerful partnerships as they pose a threat to the entire ecosystem by suffocating competition and innovation

In July, the CMA began an initial investigation into the hiring of Inflection AI’s co-founders Mustafa Suleyman and Karén Simonyan, and the relationship between Microsoft and the AI startup. The initial investigation is due to complete on 11 September, after which the CMA will take a decision on whether to proceed with a phase two investigation.

Commenting on the CMA’s ongoing investigation into big tech’s influence on AI, Josh Mesout, CIO of Civo, said: “As an industry, we should be cautious over powerful partnerships as they pose a threat to the entire ecosystem by suffocating competition and innovation. We cannot surrender AI to a virtual monopoly before it has really started.”

Mesout said it was important to maintain a diverse and competitive landscape, given the far-reaching applications of foundational models across numerous industries. “Over-dependence on a handful of major firms could stifle innovation, limit consumer choice and potentially lead to a monopoly that favours big tech,” he added.

To keep the market fair and open, Mesout called on regulators to scrutinise the types of partnerships the tech giants have forged with AI startups. Without such oversight he said: “We risk AI following the path of cloud, where hyperscalers run unchecked and leave a broken, locked-in and stifled market in their wake.”