Amazon risks heavy fines if Anthropic deal violates UK’s latest competition law.
The United Kingdom’s Competition and Markets Authority (CMA) has officially launched a probe into Amazon’s $4 billion partnership with the AI firm Anthropic, as it continues to monitor how the largest tech companies might seize control of AI to further entrench their dominant market positions.
Through the partnership, “Amazon will become Anthropic’s primary cloud provider for certain workloads, including agreements for purchasing computing capacity and non-exclusive commitments to make Anthropic models available on Amazon Bedrock,” the CMA said.
Amazon and Anthropic deny there’s anything wrong with the deal. But because the CMA has seen “some” foundational model (FM) developers “form partnerships with major cloud providers” to “secure access to compute” needed to develop models, the CMA is worried that “incumbent firms” like Amazon “could use control over access to compute to shape FM-related markets in their own interests.”
Due to this potential risk, the CMA said it is “considering” whether Amazon’s partnership with Anthropic “has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets” in the UK.
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It’s not clear yet if Amazon’s partnership with Anthropic is problematic, but the CMA confirmed that after a comment period last April, it now has “sufficient information” to kick off this first phase of its merger investigation.
By October 4, this first phase will conclude, after which the CMA may find that the partnership does not qualify as a merger situation, the UK regulator said. Or it may determine that it is a merger situation “but does not raise competition concerns,” clearing Amazon to proceed with the deal.
However, if a merger situation exists, and “it may result in a substantial lessening of competition” in a UK market, the CMA may refer the investigation to the next phase, allowing a panel of independent experts to dig deeper to illuminate potential risks and concerns. If Amazon wants to avoid that deeper probe potentially ordering steep fines, the tech giant would then have the option to offer fixes to “resolve the CMA’s concerns,” the CMA said.
An Amazon spokesperson told Reuters that its “collaboration with Anthropic does not raise any competition concerns or meet the CMA’s own threshold for review.”
“Amazon holds no board seat nor decision-making power at Anthropic, and Anthropic is free to work with any other provider (and indeed has multiple partners),” Amazon’s spokesperson said, defending the deal.
Anthropic’s spokesperson agreed that nothing was amiss, telling Reuters that “our strategic partnerships and investor relationships do not diminish our corporate governance independence or our freedom to partner with others. We intend to cooperate with the CMA and provide them with a comprehensive understanding of Amazon’s investment and our commercial collaboration.”
Why Amazon’s deal may violate UK laws
The seemingly narrow approach that Amazon and Anthropic take when defining a problematic merger situation may not fully anticipate how the CMA assesses competition concerns, though.
According to the CMA, “a range of different kinds of transactions and arrangements may constitute a relevant merger situation.” And defending the FM market requires “more careful” consideration of how tech giants are seizing control of the AI industry through “an increasing number of partnerships, investments and strategic agreements,” the CMA said.
If major players like Amazon, Meta, Google, Microsoft, and Apple can succeed in controlling “critical inputs for FM development” and “key access points or routes to market for FM release and deployment,” then the CMA worries that it could “result in reduced choice and quality, as well as increased prices for downstream business customers and consumers.”
With Amazon specifically, the CMA appears concerned that its Anthropic partnership may be insulating Amazon from competition at a time when early market movers could achieve an insurmountable lead blocking rivals from competing. That presents “a real risk that the full potential of organizations or individuals to use AI to innovate and disrupt will not be realized,” the CMA said in its report on how the FM-related market is becoming the most critical market to watch worldwide.
This “could mean that these incumbents have both the ability and incentive to shape the development of FM-related markets in their own interests, which could allow them both to protect existing market power and to extend it into new areas,” the CMA warned.
CMA gains even more enforcement powers
Amazon is not the only tech giant that the CMA is probing to protect innovation and fair competition in the AI industry. The investigation announced today comes after the CMA began investigating Google’s partnership with Anthropic in July and follows similar probes by the authority into Microsoft’s partnerships with both Mistral AI and OpenAI.
The CMA has said that it will be joining the US Federal Trade Commission and the European Commission in closely monitoring competition in the AI industry. Specifically, “in light of the risks arising from strategic partnerships and investments”—seemingly like Amazon’s—the CMA will carefully consider whether current and future FM developer investments could impact competition and consumers.
Its goal is to ensure that “the full benefits of this transformation [to] products and services across so many UK sectors”—including health care, energy, transportation, and finance—are “shared widely across society.”
Large tech companies investing in AI firms like Anthropic could have “the potential to bring pro-competitive benefits,” the CMA acknowledges.
Likely increasing tension with large tech companies as it picks apart their AI partnerships, the CMA has also said that it anticipates even stronger enforcement powers after the Digital Markets, Competition, and Consumers Bill (DMCC Bill) was passed in May.
“If unfair practices in AI-powered markets emerge, we can also tackle them through enforcement action,” the CMA warned in its FM report in April, confirming that the DMCC Bill empowers the CMA to directly “enforce consumer protection law against infringing firms and envisages significant penalties for noncompliance”—”up to 10 percent of a firm’s worldwide turnover.”
Under the DMCC Bill, the CMA can “take steps to promote competition where it considers that activities of a designated undertaking are having an adverse effect on competition.” It gives the CMA more “power to make pro-competition interventions” when “a relevant digital activity is having an adverse effect on competition” and an intervention would be a “proportionate” remedy to prevent harms to competition.
“We are ready to use these new powers to raise standards in the market and, if necessary, to tackle firms that do not play by the rules through enforcement action,” the CMA said.
