Ritika Janiya
The UK’s Competition and Markets Authority is investigating Amazon’s $4 billion investment in AI startup Anthropic. It’s the latest in a series of large technology deals being probed by the UK’s competition watchdog to ensure they don’t harm competition. Amazon and Anthropic said the deal is fair and doesn’t reduce competition.
The internet shopping and cloud services giant Amazon recently invested $4 billion in an American firm developing artificial intelligence: Anthropic. But the UK’s Competition and Markets Authority is concerned the big investment might cause harm to competition in the tech world. The CMA has started an inquiry to see if all is fine.
Why is the CMA investigating?
Basically, it is a watchdog of sorts that ensures businesses in the UK are competing fairly with one another. So, when huge deals are struck by very big firms—very influential ones such as Amazon—the CMA steps in to be sure these giant deals do not make it harder for other businesses to compete. The job of the CMA is to safeguard consumers and smaller companies from being squeezed out by big players.
In March 2024, Amazon announced that it had put $4 billion into Anthropic. Part of the deal was that Anthropic had agreed to use Amazon Web Services as its main cloud service provider. AWS makes up a large portion of Amazon’s business—it hosts and powers companies of all shapes and sizes from around the world.
The CMA, therefore, wants to know whether there will be what is called a “merger situation” — scenarios when two companies unite in a way that might reduce competition. If the CMA concludes that this transaction might result in less competition, it is likely to look further into preventing that from happening.
What Do Amazon and Anthropic Say?
Anthropic has informed that though Amazon is investing a huge amount, the company would be operating independently. This means the operational control would not lie with Amazon. Furthermore, Amazon did not have any representative seat on its board of directors and did not get any right to observe the proceedings of the meetings of the board of directors either. Anthropic has thus assured CMA that it would be cooperating fully in the inquiry process and provide information as required.
On the other hand, Amazon is disappointed that the CMA has not yet completed its probe. Amazon is of the opinion that its deal with Anthropic does not create any issues related to competition. The AI industry is pretty new; hence, the presence of various companies like Anthropic would increase the competition in the industry by providing options to the consumers, opines Amazon. Building AI models is very expensive, and companies like Anthropic need a lot of money to advance in their research. The company hopes that the investment by Amazon will not hurt the AI community but rather drive it forward.
Additionally, Amazon specified that Anthropic remains free to cooperate with other cloud service providers without any kind of limit to working on only Amazon services. This, therefore, gives Anthropic options with which to maintain its technology, keeping the market competitive.
The Bigger Picture: Other Investigations by the CMA
This will not be the first case that the CMA has examined involving tech deals with AI companies. Only last week did the CMA initiate a probe into Google’s deal with Anthropic. Other investigations by the CMA include how Microsoft collaborates with other AI companies like Inflection and OpenAI, which created the very famous AI chatbot ChatGPT.
Back in May, the CMA scrapped another probe into a deal by Microsoft with a French AI startup, Mistral. This is a case in point that the CMA looks at each case individually.
Why It Matters
The AI industry is growing very fast, and companies such as Amazon, Google, and Microsoft are all investing to stay ahead. These companies know that AI is capable of changing the way we live and work, so they’re pouring billions of dollars into developing new AI technologies.
These investments nonetheless raise questions of fairness vis-à-vis the marketplace. It’s part of the CMA’s job to make sure big deals don’t result in monopolies—where one company has too much control over a market. If that happens, it may not only hamper innovation but also do consumers harm by limiting their choices.
The CMA is probing these deals to ensure that the AI industry remains competitive and no one company dominates the market. This, of course, is not only in the best interest of the companies involved but also of consumers, who benefit from a healthy, competitive marketplace.
The $4 billion investment by Amazon in Anthropic will be probed as part of a wider push by the CMA to make sure large tech deals do not hurt competition. Though Amazon and Anthropic have assured perfect fairness and openness with regards to their partnership, the CMA will review the deal in relation to consumer and other businesses’ interests. How this investigation eventually goes could set a big precedent for the future of the AI industry and how big tech companies operate.
