Because of the integrated nature of an ecosystem, contrary to simple market power assessments, where a market player is able to exert power in an immediate level of the market, the strategy employed by an ecosystem participant, when anticompetitive, can impact competition significantly, depending on the extent of asymmetry in the ecosystem (Lianos & Carballa-Smichowski, 2022).
This blog post provides a summary of research conducted by Econolicy Africa presented at the Just AI conference organized by Research ICT Africa in June 2024. It motivates why AI policy should be adopted within a competition framework to ensure that markets remain open, fair, and competitive.
Methodology
The methodology examined interconnectedness, codependence and complementarities inherent in the AI ecosystem and related input markets. Network analysis was applied to an AI network structure comprising of graphically represented relationships among nodes (firms to be analysed) and the edges between them (to represent supply or purchase relationships). The research also analyzed centrality in the network structure with centrality measures proposed by (Phillip Bonacich,1987), (Freeman,1979) and methodological considerations by Opsahl, (Agneessens and Skovertz,2010) as a measure of power in the network. This enabled an identification of power within the ecosystem i.e. Who can act as a gatekeeper? What are the choke points along the supply chain of the ecosystem? Who can profit excessively? Who controls access to compute resources? Who is the main conduit to AI customers?
AI ecosystem network structure
Highlights:
AI policies designed and implemented based on a competitive framework adopt a whole-of-government approach to promoting competition.
Competition agencies equipped to address competition harm from increasing concentration and market power arising from serial mergers and acquisitions are better prepared to enforce competition law in AI markets.
Economies of scope and scale for centrally positioned players should not be to the detriment of smaller African AI ecosystem participants.
The promotion of entry and participation by smaller players and new entrants in AI ecosystems is a priority issue for AI policy design.
Recommendations
To address increasing market concentration and potential abuse of power or dominance in the AI ecosystem:
Competition agencies must understand the ecosystem theories of harm associated with AI ecosystems and proactively assess mergers and acquisitions to address competitive harm from serial mergers and acquisitions in the AI ecosystem (Lesson from SA Competition Commission- guidelines)
Revision of competition enforcement and/or investigation tools to be better tailored for regulation of digital ecosystems- departing from conventional approaches used to evaluate anti- competitive conduct in markets, including techniques such as market definition and evaluation of competitive effects. (lesson from EU- where they adopted a revised market definition notice for competition cases)
Conduct market studies and research for a better understanding of AI and its impact on competition
2. To promote an understanding of AI policy, competition and economic justice
Design and develop mechanisms and programmes that promote entry and participation by small players and new entrants in AI ecosystems.
Development of policies and regulations that prioritize AI ecosystem development and its application in Africa - whole of government approach to regulation required.
Utilizing forums like the International Competition Network (ICN) to understand AI technologies and how they can be strategically integrated into the work of competition agencies to augment staff capabilities and for greater efficiency (e.g. ICN and ACF platforms can also be utilised for information sharing)
Stakeholder engagement and advocacy - establishing cross- governmental collaborations made up of government institutions such as data and information regulators, department of telecommunications, infrastructure etc.
Promoting competition in AI markets through collaboration among competition authorities
Competition agencies engaging private sector partners through stakeholder engagements and advocacy including big tech companies, AI and software developers, and AI deployers
Competition, market power and AI ecosystems in Africa was authored by Oluwatobi Ogundele, Lozindaba Mbvundula and Balisa Mhambi.
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