A ‘Minority Report’ on Antitrust Policy in the Generative AI Ecosystem
Abstract
Competition regulators have proposed preemptive regulatory approaches toward the generative artificial intelligence ecosystem, with a focus on partnerships, investments, and other relationships involving technology platforms and independent developers of foundation models and large language models. A close examination of platform/developer relationships in the generative AI ecosystem, and in particular the Microsoft/OpenAI relationship, shows that these arrangements implement an efficient division of labor between platforms, which specialize in the supply of financial capital and computing infrastructure, and model and applications developers, which specialize in the supply of innovation expertise. Developers typically enter into non-exclusive relationships with platforms, which diminishes anticompetitive risks arising from potential foreclosure effects while generating procompetitive gains arising from scale economies, reduced cost of capital, and accelerated entry. Most critically, these relationships may sometimes preserve the economic viability of model developers that face exceptional capital requirements during pre-revenue periods. While there is little basis for antitrust intervention at this stage in the development of the AI ecosystem, there is considerable basis for enhanced enforcement of intellectual property rights to address a potential market failure in supporting the production and distribution of content assets in AI-enabled digital environments.