The Competition and Markets Authority is conducting a review of artificial intelligence foundation models, focusing on how they may impact competition in other markets.
Big tech firms are subject to several competition investigations, in the UK and Europe, into how they leverage customer data from their core digital activities.
Existing data protection legislation (such as UK GDPR) already limits the extent to which big tech firms can use data from their core digital activities in retail financial services.
The CMA and the Information Commissioner’s Office plan to publish a joint statement on competition, consumer protection and data protection in AI foundation models.
The CMA is also conducting a market investigation into cloud services, while the Bank of England is reviewing risks arising from big tech’s provision of cloud services.
There is therefore no shortage of UK regulatory scrutiny of big tech, and these initiatives appear well-placed to address the risks identified by the FCA.
Crucially, the DMCC bill is expected to come into force this year. This will empower the CMA to set entity-specific, forward-looking codes of conduct governing the digital activities of big tech firms with strategic market status.
A code of conduct may require a firm to, for example, trade on 'reasonable and fair terms', and not apply discriminatory pricing or engage in self-preferencing.
Penalties for breach will be significant and high-value litigation brought by those impacted may follow. These powers are likely to render the DMCC the most targeted and effective means of mitigating the risks of big tech’s expansion into retail financial services.
In its feedback statement, the FCA recognises that it may have a role to play in developing specific proposals for the CMA to adopt, when using its powers under the DMCC.
But until then, the FCA should continue to exercise restraint, bearing in mind the broader legal and regulatory controls on big tech’s expansion into retail financial services.
David Rundle and Andrew Leitch are partners, and Ben Bolderson is an associate at BCLP
