Competition regulation

ACCC accepts Telstra and Optus commitments amid Google search investigation

The Australian Competition and Consumer Commission (ACCC) has reached agreements with Telstra and Optus regarding Google’s search services following an investigation into potential anticompetitive practices. The ACCC found that Google had arrangements with Telstra and Optus since at least 2017, ensuring its search services were pre-installed as the default on Android devices supplied by these telecom companies. These agreements restrict competition by limiting the visibility of rival search engines.

Telstra and Optus have cooperated with the ACCC and agreed that, as of 30 June 2024, they will not renew or enter into any new agreements with Google that mandate its search services as the exclusive default option on devices they distribute. These undertakings aim to promote competition and consumer choice in Australia’s digital market.

ACCC Commissioner Liza Carver emphasised the importance of these undertakings in enhancing consumer choice and fostering competition in digital platforms. She noted that practices such as exclusivity agreements can stifle innovation and limit options for consumers, highlighting the need for digital platforms to adhere to Australia’s competition laws.

The ACCC’s broader investigation into Google’s practices continues, focusing on potential competition concerns raised by these agreements and their impact on the digital economy. The commission plans to submit further reports on its findings, including recommendations for regulatory reforms aimed at promoting fair competition among digital platforms in Australia.

Big Tech faces antitrust scrutiny amid surge in generative AI sector

Two companies that benefited the most from AI average, Nvidia and Microsoft, are the most exposed to antitrust investigations for AI monopolies. Regulatory authorities have shifted their approach, acting quickly against potential monopolistic practices instead of taking years to intervene.

Notable investigations include the US Department of Justice examining Nvidia’s alleged anticompetitive behaviour in the GPU market and the Federal Trade Commission (FTC) probing Microsoft’s $13 billion investment in OpenAI and strategic staff acquisitions from Inflection. The UK’s Competition and Markets Authority (CMA) is also investigating, particularly concerned about the over 90 partnerships tech giants have formed with large language model developers since 2019, potentially stifling competition.

Politically, there’s a risk that excessive intervention could be seen as stifling innovation, particularly in the face of global competitors like China. Regulators must balance fostering competition with enabling innovation, ensuring that the rise of generative AI, which promises significant technological upheaval, does not result in a market dominated by a few powerful players.

EU antitrust probe targets Microsoft-OpenAI and Google-Samsung AI deals

EU antitrust regulators scrutinise Microsoft’s partnership with OpenAI and Google’s AI deal with Samsung due to concerns over exclusivity clauses. Competition chief Margrethe Vestager plans to gather more third-party views. This development comes amid global unease about Big Tech’s dominance in new technologies.

After sending questionnaires to tech firms regarding their AI partnerships, Vestager now seeks additional information about Microsoft’s $13 billion investment in OpenAI’s for-profit subsidiary, which would result in a 49% stake, to determine if it harms competitors.

While Microsoft’s deal isn’t subject to EU merger rules, Vestager also investigates if Big Tech is blocking smaller AI developers from accessing users and businesses. Similar concerns apply to Google’s agreement to pre-install its Gemini Nano model on Samsung devices.

Vestager also examines ‘acqui-hires,’ where companies acquire others primarily for their talent, such as Microsoft’s $650-million acquisition of Inflection, to ensure these practices don’t bypass merger control rules and lead to market concentration.

Why does it matter?

Reuters reported in April that the EU regulators were building a case that could lead to an antitrust investigation into Microsoft’s $13 billion investment in OpenAI. Partnerships involving Alphabet, Amazon, and Anthropic are also under scrutiny from antitrust enforcers on both sides of the Atlantic.

Microsoft continues OpenAI services in Hong Kong amid new API restrictions

Microsoft has stated it will keep providing eligible customers in Hong Kong with access to OpenAI’s AI models, like ChatGPT, via its Azure cloud platform. The decision stands despite OpenAI’s recent move to restrict API access from unsupported areas, including mainland China and Hong Kong.

OpenAI, with Microsoft as its biggest investor, notified developers in unsupported regions that it would begin blocking API access on 9 July. That step aligns with the US government’s efforts to curb China’s access to advanced AI technology due to national security concerns.

Microsoft’s local branch assured there will be no changes to their Azure OpenAI service offerings in Hong Kong. Although OpenAI’s services are not officially available in mainland China and Hong Kong, users in these regions often circumvent restrictions using virtual private networks or proxies.

Why does this matter?

The restriction by OpenAI aligns with broader US efforts to limit China’s access to advanced technology, reflecting ongoing tensions and strategic competition between the US and China. Microsoft’s decision to maintain services in Hong Kong contrasts with OpenAI’s broader restrictions, potentially pushing Chinese developers toward local AI platforms such as Zhipu AI, Baichuan, and those from major tech companies like Alibaba and Baidu. These local alternatives offer incentives to attract users impacted by OpenAI’s new policies.

Italian watchdog tests AI for market oversight

Italy’s financial watchdog, Consob, has begun experimenting with AI to enhance its oversight capabilities, particularly in the initial review of listing prospectuses and the detection of insider trading. According to Consob, these AI algorithms aim to swiftly identify potential instances of insider trading, which traditionally requires significantly more time when conducted manually.

The agency reported that its AI algorithms can detect errors in just three seconds, a task typically taking a human analyst at least 20 minutes. These efforts were part of testing conducted last year using prototypes developed in collaboration with Scuola Normale Superiore University in Pisa, alongside an additional model developed independently.

Consob views the integration of AI as pivotal in enhancing the effectiveness of regulatory controls to detect financial misconduct. The next phase involves transitioning from prototype testing to fully incorporating AI into Consob’s regular operational procedures. That initiative mirrors similar efforts by financial regulators globally who are increasingly leveraging AI to bolster consumer protection and regulatory oversight.

For instance, in the United Kingdom, the Financial Conduct Authority (FCA) has utilised AI technologies to combat online scams and protect consumers. That trend underscores a broader international movement within regulatory bodies to harness AI’s potential in safeguarding market integrity and enhancing regulatory efficiency.

EU charges Microsoft over Teams bundling

EU antitrust regulators have accused Microsoft of illegally bundling its Teams chat and video app with its Office product suite, claiming the company’s recent efforts to separate the two were insufficient. The European Commission stated that Microsoft breached antitrust rules by tying Teams to its popular Office 365 and Microsoft 365 suites, which stifled competition.

The regulatory action follows a 2020 complaint by Slack, a rival workspace messaging app owned by Salesforce. Microsoft introduced Teams to Office 365 in 2017 at no extra cost, replacing Skype for Business, and its use surged during the pandemic due to its video conferencing capabilities.

The European Commission has preliminarily determined that Microsoft’s changes don’t adequately address the competition concerns and that more actions are needed. Microsoft has expressed willingness to work with the EU regulators to find acceptable solutions.

2027 could spell the dawn of artificial superintelligence

As China edges closer to the proverbial ‘splinternet’ there is more talk of the advent of AI on the continent. According to IBM, ASI is a hypothetical software-based AI system with an intelligence scope beyond human intelligence, possessing cognitive functions and thinking skills well beyond that of known humans.

According to SoftBank CEO Masayoshi Son, at the implementation level, ASI will bring about real change to our societies in about ten years. The CEO assured investors of his company’s plans to tap in to the trend, pinpointing the company’s majority shareholder portfolio in the chip design firm, Arm.

Similar developments in China see Huawei releasing HarmonyOS, the beta version of a mobile operating system, and rival to Android on the continent. Versions of the software are carded to come to market housed in smartphones, tablets, computers, smartwatches, smart glasses and earbuds by year end. The company also plans to build an ecosystem around the OS. Such technological developments in China further behooves the East and West to approach the table of negotiations as equals in the field of AI and other emerging technologies governance.

UK’s CMA investigates Hewlett Packard over $14 billion acquisition of Juniper Networks

The UK’s Competition and Markets Authority (CMA) has commenced investigating Hewlett Packard Enterprise’s (HPE) proposed $14 billion acquisition of Juniper Networks. The inquiry seeks to determine whether the acquisition might lead to competition issues within the UK market, with a deadline set for 14 August to decide if a more comprehensive probe is warranted.

In January, HPE, a US-based technology firm, announced its intention to purchase Juniper Networks to enhance HPE’s AI capabilities and expand its networking business. HPE anticipates doubling its networking operations through this acquisition, aligning with the broader industry trend known as the AI gold rush, where companies invest heavily to advance their technological offerings.

Why does it matter?

The CMA’s preliminary investigation points to potential regulatory concerns about reducing competition, focusing on UK market dynamics and consumer choices. If significant issues are identified by the August deadline, the CMA may thoroughly examine the merger.

The legal action underscores the CMA’s role in maintaining fair competition and monitoring significant market transactions, especially in the rapidly evolving AI sector, to prevent monopolistic practices and ensure a balanced market environment.

Neither HPE nor Juniper Networks have provided comments attributed to the Juneteenth holiday affecting market operations in the US.

Google’s bid to end US antitrust case over digital advertising rejected

Google has lost its bid to dismiss a US government lawsuit accusing it of monopolistic practices in the digital advertising market in an ongoing antitrust scrutiny of major tech companies. The ruling marks a critical juncture in the broader effort to regulate and curtail the market power of tech giants. US District Judge Leonie Brinkema in Alexandria, Virginia, denied Google’s motion to dismiss the case during a recent hearing, as documented in court records.

The decision allows the lawsuit, originally filed by the Department of Justice (DOJ) in January 2023, to proceed. The DOJ alleges that Google has engaged in anti-competitive behavior to maintain its dominance in the digital advertising market, using its position to unfairly disadvantage competitors, violating Section 2 of the Sherman Antitrust Act. The lawsuit is part of a broader wave of antitrust actions targeting Big Tech, as regulators aim to address concerns over market monopolization and its effects on competition, consumers, and innovation. According to the DOJ, Google has employed various strategies to stifle competition, including acquiring competitors, favoring its own services, and implementing restrictive policies that disadvantage rival ad tech firms.

Last week, Google achieved a notable victory when Judge Brinkema allowed the trial to proceed without a jury, following a settlement of claims that its conduct harmed the US government. Judge Brinkema is scheduled to preside over the trial on September 9. In response to the ruling, a Google spokesperson expressed disappointment, stating that the company strongly disagrees with the DOJ’s claims and plans to vigorously defend itself in court. Google maintains that its digital advertising products benefit publishers and advertisers by providing efficient, effective tools that foster competition.

Why does it matter?

The outcome of this case could have implications for the tech industry, particularly for digital advertising. If the court ultimately rules against Google, it could lead to significant changes in how digital advertising markets operate, potentially requiring Google to divest parts of its advertising business or change its business practices. The case against Google is pivotal to the ongoing debate over the power and influence of tech giants. It reflects increasing regulatory scrutiny and a shift towards more aggressive antitrust enforcement.

The ruling not only impacts Google but also sets a precedent for future actions against other major players in the tech industry. As the case moves forward, it will be closely watched by industry stakeholders, policymakers, and consumers alike, as it holds the potential to reshape the digital advertising ecosystem and redefine the boundaries of acceptable business practices for tech companies.

Japan mandates access for third-party apps

Japan has passed a new law requiring tech giants like Google and Apple to allow access to third-party smartphone apps and payment systems on their platforms, threatening substantial fines for non-compliance. Like the EU’s Digital Markets Act, this legislation mandates fair access to operating systems, browsers, and search engines, with fines reaching up to 30% of revenue for continued anti-competitive behaviour.

The law was approved by Japan’s National Diet with no amendments and aimed to align Japan’s digital market regulations with those of the United States and Europe. That move is intended to foster fair competition and improve the competitive environment for software, such as app stores while ensuring consumer security. The law is set to take effect by the end of 2025.

Japan’s Fair Trade Commission highlighted the necessity for this new legal framework to address the dominance of major tech companies. Although the law does not explicitly name companies, it targets those like Google and Apple, often seen as a ‘duopoly’ in the smartphone app market. The EU’s similar regulatory efforts, particularly the Digital Markets Act, have faced criticism from Apple regarding potential risks to user privacy and security.