European Commission initiates inquiries into competition in virtual worlds and generative AI

Generative AI and virtual worlds are recognized as disruptive technologies with significant potential.  The European Commission has taken measures to address the challenges posed by generative artificial intelligence (AI) and virtual worlds, signalling a commitment to maintaining competition in rapidly evolving markets. It has called for contributions to be submitted by 11 March 2024, with plans for a workshop in Q2 of 2024 to consolidate the various responses. Here's a summary of the key developments.

Virtual worlds and Generative AI systems

Virtual worlds are persistent, immersive environments, based on technologies including 3D and extended reality (XR), which make it possible to blend physical and digital worlds in real-time, for a variety of purposes such as designing, making simulations, collaborating, learning, socialising, carrying out transactions or providing entertainment.

Generative AI systems are AI systems that generate, in response to a user prompt, synthetic audio, image, video or text content, for a wide range of possible uses, and which can be applied to many different tasks in various fields.

Calls for Contributions

• Stakeholders are invited to contribute insights on the level of competition within virtual worlds.
• Feedback is sought on how competition law can safeguard competitiveness in these emerging markets.
• A separate call for contributions focuses on generative AI.
• The Commission is keen on understanding competition dynamics in the generative AI sector.

Investigation into Digital Agreements

• Agreements between major technology players and generative AI developers/providers are under scrutiny. An example of one of these agreements is the recent investment by Microsoft into the US based AI research and development organisation OpenAI. The concern is whether the investment falls under the scope of the EU Merger Regulation.
• The Commission’s goal is to assess the impact of these partnerships on the overall dynamics of the market.

Market Impact

• AI venture capital investment in the EU exceeded €7.2 billion in 2023.
• The European virtual worlds market reached over €11 billion in 2023.
• Both generative AI and virtual worlds are expected to experience exponential growth, shaping the competitive landscape for businesses.

Importance of Competition Rules

• Effective enforcement of EU competition rules is highlighted as essential for maintaining a competitive Single Market, a crucial asset for job creation and economic growth.  
• The Commission sees these competition rules in context of others steps it is taking to address the challenges posed by these new technologies: “in July 2023, a Communication on Web 4.0 and virtual worlds was published, while in December 2023, the European Parliament and the Council reached a political agreement on the Commission's proposal for an AI Act: the first-ever comprehensive framework on Artificial Intelligence will ensure that AI is safe and respects fundamental rights, while fostering innovation.” 

If you would like to discuss how current or future regulations impact what you do with AI, please contact Tom Whittaker, Brian Wong, David Varney, Lucy Pegler, Martin Cook or any other member in our Technology team.

This article was written by Nathan Gevao and Tom Whittaker.

Virtual worlds and generative AI are rapidly developing. It is fundamental that these new markets stay competitive, and that nothing stands in the way of businesses growing and providing the best and most innovative products to consumers. We are inviting businesses and experts to tell us about any competition issues that they may perceive in these industries, whilst also closely monitoring AI partnerships to ensure they do not unduly distort market dynamics. Margrethe Vestager, Executive Vice-President in charge of competition policy

https://ec.europa.eu/commission/presscorner/detail/en/IP_24_85