Authorities have determined that the domestic generative artificial intelligence (AI) market is being led by a few dominant players, raising concerns about restricted competition.
Competition authorities are reviewing the possibility of legal regulation regarding consumer harm cases arising from the vast data collection processes conducted by some AI companies such as OpenAI, Google, and Microsoft (MS).
On the 17th, the Korea Fair Trade Commission (KFTC) published a policy report titled "Generative AI and Competition," which analyzes the domestic market related to generative AI technology triggered by ChatGPT, examines competition and consumer issues, and suggests future tasks. This is the first policy report from the competition authorities analyzing the generative AI market.
The KFTC viewed the generative AI market as one where high entry barriers can be established in key production factors. Significant capital and advanced technological capabilities are required at each stage?such as infrastructure, development, and implementation?and once a company that has secured the market achieves economies of scale and scope, it becomes difficult for latecomers to enter.
Specifically, in the AI semiconductor sector, the market includes overseas players such as Nvidia, which enjoys high demand preference, Intel, and AMD, as well as domestic companies like Sapion Korea, Rebellion, and FuriOSAI.
In the cloud computing sector, overseas cloud service providers (CSPs) such as Amazon Web Services, Microsoft, and Google hold a relative advantage over domestic CSPs like Naver Cloud, KT Cloud, and NHN Cloud.
Regarding foundational models that serve as the basis for AI functionality, big tech companies such as Google, Meta, OpenAI, MS, and Nvidia, which have already secured essential infrastructure, dominate the market, while domestic companies like Naver, Kakao, LG, KT, NCSoft, and Upstage are relatively disadvantaged.
Based on this analysis, the report expressed concerns that the current domestic market environment could harm competition and consumer interests. It raised the possibility that companies with significant market power might restrict access to essential inputs by manipulating transaction conditions such as price and quantity or force bundling with other products.
Additionally, it warned that exclusive dealing might be enforced to attract or retain customers, or that unfair use of technology could occur during cooperation or partnerships between companies.
There is also a possibility that financially strong vertically integrated companies could transform into entities abusing their dominant market position through investments or acquisitions. From the consumer perspective, indiscriminate collection of vast amounts of data for AI training without obtaining genuine consent could harm consumer interests.
Based on these conclusions, the KFTC plans to pursue institutional improvements to establish a foundation for fair competition. Starting next year, it will conduct follow-up research to review the possibility of regulatory measures under the Fair Trade Act and Consumer Protection Act concerning AI companies’ potential infringement on consumer interests in data collection and utilization.
Lee Junheon, head of the Market Surveillance Policy Division at the KFTC, stated, "Although AI companies claim to obtain consent from content providers during data collection, there are cases where genuine consent is not reached. We will study whether there is room to examine this from a competition law perspective."
The KFTC is also examining whether new forms of corporate mergers will fall under its review. MS has hired key personnel from Inflection AI and secured major intellectual property licenses through a partnership, and the UK competition authority has considered this a subject for merger review.
The KFTC will closely monitor concerns about competition restrictions arising within the domestic AI ecosystem. Regarding future institutional improvements, it said, "Some academic opinions suggest that amendments to the Fair Trade Act are necessary concerning data collection, but further follow-up research is needed. In-depth research is also required on matters related to corporate mergers."
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