OpenAI ChatGPT

As global big tech strengthens its dominance in the generative artificial intelligence (AI) market, the Fair Trade Commission has taken action. The goal is to curb monopolistic practices of global corporations and establish a fair competitive order. The Fair Trade Commission plans to initiate legal and institutional improvements next year to create a fair competition environment, focusing on data monopolies and mergers.

According to the report "Generative AI and Competition," recently published by the Fair Trade Commission on the 22nd, the commission analyzed that generative AI provides "economies of scale" favorable to initially leading corporations due to the substantial capital and data access required. This market structure serves as a significant entry barrier for latecomers, widening the gap over time, according to the commission's assessment.

This report was compiled to examine potential unfair competition and consumer harm in the generative AI market, which has gained attention since the advent of ChatGPT, and to identify policy tasks to address these issues.

In the AI semiconductor market, Nvidia holds a dominant position, followed by global corporations such as Intel and AMD. Domestic companies like Sapeon Korea, Rebellion, and FuriosaAI have entered the competition, but the Fair Trade Commission evaluated that the gap in technology and capital with global big tech remains significant. This is not just a technological disadvantage but a structural issue stemming from market dominance, which acts as a barrier to the development of the domestic AI industry, the commission added.

The Fair Trade Commission also noted similar patterns in the cloud infrastructure market. While global corporations like Amazon Web Services (AWS), Microsoft, and Google dominate the global market, domestic corporations such as Naver Cloud and KT Cloud face difficulties in expansion due to a lack of technology and capital. This environment confines domestic corporations to competition in specific areas rather than competing in the global market, the commission pointed out.

The Fair Trade Commission sees a possibility that the monopolistic practices of global big tech could also negatively impact consumers. This is due to the potential restrictions on data access rights, bundled sales of essential resources, and unilateral setting of transaction conditions that could make market entry more challenging for latecomers. This could lead to a reduction in consumer choices and rising service prices.

Lee Jun-heon, director of the Fair Trade Commission's market surveillance policy division, noted, "We are reviewing a gradual improvement direction through subordinate regulations or notices rather than independent legal amendments," and added, "We plan to publish a policy report focused on the AI data market next year."

Current status of entry into the generative AI value chain by major operators. /Courtesy of Fair Trade Commission

The Fair Trade Commission believes it is necessary to regulate new types of mergers beyond traditional forms. Existing merger regulations have been limited to traditional forms such as stock acquisitions or mergers, but global big tech is judged to be enhancing market dominance through various means such as technology licenses, asset sharing, and partnerships. The United Kingdom has already included non-traditional mergers as a subject for regulation, and the commission is considering improvements to the domestic legal system with reference to this.

Accordingly, the Fair Trade Commission is expected to closely monitor related activities centered on the vertical integration and strengthening of market dominance by global big tech. In particular, actions by big tech corporations in the AI industry that combine technology platforms and key resources to exclude competitors or promote favorable conditions for their services may become subject to sanctions. Activities such as restricting competitors' entry by combining operating systems (OS) and AI technology or setting transaction conditions using technology licenses are representative areas likely to be scrutinized.

The Fair Trade Commission also plans to closely monitor activities that raise concerns about competition restrictions in the domestic AI ecosystem. In particular, it sees potential issues if consent from copyright holders is not clearly obtained in the process of collecting data for generative AI development, or if consumers are not fully aware even if this is included in the terms and conditions.

Earlier, the German competition authority imposed corrective measures on Facebook in 2019. The German authority judged that Facebook's actions of collecting and using user data based on service terms constituted an abuse of its dominant market position. In this process, it was determined that the content specified in the terms was neither sufficiently understood nor agreed upon by consumers, and corrective measures were issued to amend the data collection and use methods accordingly. The Fair Trade Commission plans to refer to the German case to closely examine consumer consent procedures and the content of terms and conditions in domestic data utilization processes.

Experts say that a regulatory framework by the Fair Trade Commission is necessary as the AI market is rapidly evolving. Professor Lee Jeong-hee of Chung Ang University's Department of Economics noted, "While the AI market is expanding, it is like a road without traffic lights," adding, "There may always be opposition to regulatory strengthening, but regulatory gaps could lead to greater side effects, so guidelines are necessary."