Lessons learnt: are regulators going to move faster to respond to metaverse and AI trends?

In a speech delivered earlier this month, Margrethe Vestager repeated the challenges presented by the shift to a digital economy, noting that it is already time for the European Commission to “start asking what healthy competition should look like in the metaverse, or how something like ChatGPT may change the equation”. 

On the same day, Benoît Coeuré, president of the French Autorité de la Concurrence, focused his attention on the rollout of AI chatbots such as ChatGPT as an issue for antitrust regulators to grapple with, including in terms of copyright.

Watch this space: a broader trend in regulation and enforcement

These comments should come as no surprise. While regulators have previously been strongly criticised for their perceived failure to clamp down on Big Tech players, we are now observing a paradigm shift in how public authorities globally approach the digital economy.

On the antitrust front, the Commission is progressing its investigations into, among others, Apple music streaming, Facebook marketplace, Google Ad tech. National competition authorities are also far from idle, with several ongoing investigations and market investigations (e.g., the UK Competition and Markets Authority’s (CMA) ongoing market investigation into mobile browsers and cloud games). Mergers have not escaped the regulators’ attention, with transactions such as the Microsoft / Activision Blizzard deal being heavily scrutinised by the Commission and CMA alike.

In parallel, a complex new digital regulatory framework is being designed, providing additional intervention tools. At EU level, preparations are ramping up for the implementation of the Digital Markets Act (DMA) and the Digital Services Act (DSA). The EU legislature is also exploring further, more targeted regulations, such as the Artificial Intelligence Act or some form of regulation of the metaverse. 

A similar trend can be witnessed at national level. In Germany, a revolutionary reform of competition law has made Germany the first country in the world with preventative rules aimed at countering the market power of large digital platforms. And in the UK, the Digital Markets, Competition and Consumer Bill is expected to be put before Parliament to create a new framework for digital players.

Shaping the new digital world

Some of the key targets of this increased interventionism are areas which are still in early development, such as the metaverse or AI chatbots. Regulation of the metaverse is scheduled to be discussed by the Commission in May 2023, while the Commission has recently indicated a new communication will describe its vision for "emerging virtual worlds” that can be used safely and with confidence by the public and businesses. The initiative will be informed by input from a “citizens’ panel”.

These early warning signs about potential antitrust concerns in new markets (see our previous posts regarding the metaverse and AI chatbots), show that competition authorities are planning to adopt a forward-looking and early interventionist stance to try and shape a new digital world.

And they make no secret of their objectives. Margrethe Vestager stated in the abovementioned speech that: “We need to anticipate and plan for change, given the obvious fact that our enforcement and legislative process will always be slower than the markets themselves.”

More complexity in digital markets

For companies active in digital markets, this will mean more complexity, as  increasingly active enforcement by antitrust regulators will co-exist with sweeping new powers provided under the DMA (and potentially further legislation in the pipeline). 

The complexity arises, firstly, from the inherent potential for overlapping investigations framed under different sets of rules and with potentially conflicting outcomes. In particular, there are still open questions to be answered on how competition authorities and regulators will cooperate, for instance regarding the definition of remedies. Secondly, it is yet unclear whether digital-specific regulation, such as the DMA, could result in less or more targeted antitrust scrutiny in the future.

In coming years, this is likely to lead to increased enforcement costs for tech players which are now on the radar of (i) both competition authorities and regulators, (ii) for a range of practices that is widening (iii) in both well-defined and new markets.