Artificial intelligence (AI) is transforming markets at unprecedented speed. From pricing and procurement to product development and consumer engagement, AI is driving efficiencies and innovation across sectors. At the same time, competition authorities in the UK, EU and US are intensifying scrutiny of how AI is developed and deployed, concerned that it could reduce competition, entrench market power and harm consumers if left unchecked.
For businesses, this regulatory focus presents both risk and opportunity. While compliance expectations are rising, competition law can also be used strategically to gain commercial leverage and to challenge anti competitive conduct by rivals.
Key takeaways
- Regulators are increasingly concerned that AI could reduce competition and negatively impact consumers.
- Big Tech’s role in shaping AI markets is under heightened scrutiny.
- Regulators are focusing on the use of algorithms and data by competitors, and partnerships with AI innovators.
- Businesses that act early can turn competition law into a strategic advantage, not just a compliance burden.
Why competition authorities are focused on AI
Competition regulators have long scrutinised digital markets. AI is attracting particular attention due to its ability to:
- reshape pricing, distribution and market access at scale;
- reduce uncertainty between competitors; and
- amplify the power of firms controlling critical AI inputs such as data, compute and cloud infrastructure.
Authorities including the UK Competition and Markets Authority (CMA), the European Commission and the US Department of Justice recognise the pro competitive potential of AI, including innovation and lower costs. However, they are equally alert to the risk that AI could distort markets if used to coordinate pricing, foreclose rivals or reinforce dominance.
In the UK, the Digital Markets, Competition and Consumers Act (DMCCA) came into force in 2025, significantly expanding the CMA’s powers—particularly in relation to digital markets.
Since the DMCCA has come into force, the CMA has designated several companies with strategic market status (SMS), enabling it to impose conduct requirements. Indeed, it has already imposed various requirements tied to the use of AI on SMS-designated companies.
This includes Google, which was designated with SMS in general search services. In June 2026, the CMA imposed new conduct requirements on Google targeted on certain AI developments in Google search. Under these:
- Publishers must have the ability to opt out of their content being used to power AI features in search, such as AI Overviews.
- Google must ensure that publisher content is properly attributed, using clear links, in AI generated search results.
- Publishers must have the ability to opt out of allowing their content to be used for the ‘fine-tuning’ of AI models.
The CMA also launched an investigation to determine whether Microsoft should be designated as having SMS in respect of its business software ecosystem, indicating that it would focus in part on whether AI competitors are able to integrate with Microsoft’s business software. The CMA recognised that the business software sector is changing rapidly, with increased AI functionality and a shift towards agentic AI in familiar workplace tools. Microsoft’s customers should benefit from access to the best tools in the market, with the ability to mix and match software and AI services from a broad range of competing suppliers.
Similar developments are underway internationally, and regulators globally are gaining the ability to impose more effective guardrails around AI deployment. For instance, following Google’s gatekeeper designation under the Digital Markets Act (DMA) in September 2023, the European Commission opened two proceedings in January 2026. These focused on: (i) seeking to ensure that Google grants third-party AI service providers equally effective access to the same features as those available to Google's own AI services (e.g., Gemini); and (ii) seeking to ensure that third-party providers of online search engines and AI chatbot providers have access to a useful dataset of the data held by Google Search, so that they can optimise their services and offer users genuine alternatives.
Big tech, AI and market power
Regulators remain concerned that large technology companies already hold entrenched positions in key digital markets. AI is increasingly viewed as another means by which those firms could extend their dominance. Authorities are particularly focused on:
- self preferencing, where platforms promote their own AI tools over rivals;
- control of upstream AI inputs such as data, compute and cloud infrastructure; and
- the risk of winner takes all dynamics, where a small number of firms shape AI markets to the detriment of competition.
Such outcomes could ultimately harm businesses and consumers through reduced choice, lower quality and higher prices.
Algorithmic collusion and pricing
One of the most closely monitored risks is whether AI driven pricing tools could facilitate collusion, even without direct communication between competitors. Competition authorities have identified several scenarios of concern:
- Hub and spoke arrangements, where competitors use the same pricing software or algorithm provider, enabling indirect coordination.
- Autonomous algorithmic collusion, where self learning algorithms independently adapt to market conditions and align prices in real time without explicit human direction.
- Use of sensitive or confidential competitor data in training models, increasing the risk of unlawful information exchange or tacit coordination.
Crucially, regulators have made clear that lack of intent is not a defence. Companies may still face liability even where they do not communicate with competitors or are unaware that algorithms are operating anti competitively. Regulators have emphasised that responsibility for compliance rests with the deploying business, not the technology provider.
Although there are no EU infringement decisions as yet in this area, the European Commission has publicly confirmed that multiple investigations into algorithmic pricing and data driven coordination are currently underway. This enforcement stance is mirrored at national level, including in the CMA’s ongoing investigation into hotel chains’ use of a shared data analytics platform launched in March 2026. The CMA has also published a detailed blog post, discussing how, while algorithms and AI systems can deliver significant benefits for businesses and consumers, they can also raise risks of collusion and harm. Businesses should ensure they understand the law, and mitigate risks that may be posed by algorithmic pricing (including the newer and more subtle risks posed by LLM and agentic AI). In the United States, parallel enforcement action and litigation relating to algorithmic rent setting and price optimisation tools reinforce the message that algorithmic pricing will not shield firms from scrutiny or enforcement, and may result in hefty settlements for companies relying on algorithmic pricing which results in a distortion of the market due to the exchange of non-public data through pricing software. In May 2026, the DoJ confirmed that certain algorithmic pricing conduct could potentially lead to criminal charges.
Abuse of dominance in AI enabled markets
Competition authorities are also examining whether dominant firms may use AI to foreclose rivals or entrench market power. Areas of concern include:
- tying and bundling AI products with other services;
- refusals to supply or interoperate, restricting access to critical AI platforms or infrastructure;
- self preferencing through algorithmic ranking or design; and
- personalised or discriminatory pricing, where AI is used to charge higher prices to less price sensitive consumers.
While some practices may have legitimate justifications, regulators are increasingly willing to swiftly intervene where AI is perceived to distort competitive outcomes. In February 2026, the European Commission launched an investigation relating to a potential abuse of dominance relating to Meta’s updated business terms for WhatsApp, which excludes third-party AI assistants from accessing and interacting with users on WhatsApp. In early June 2026, the European Commission imposed interim measures requiring Meta to restore third-party AI assistants’ free access to WhatsApp under the same conditions as before its policy change, due to the risk of serious and irreparable damage to competition resulting from Meta’s conduct.
Strategic partnerships and merger control
In the AI sector, large technology firms increasingly rely on strategic partnerships rather than outright acquisitions. These may involve access to compute, IP licensing, minority investments or collaboration with AI developers.
Such structures can fall outside traditional merger control thresholds, raising concerns that partnerships are being used to avoid scrutiny—particularly in relation to so called killer acquisitions.
Regulators have identified an “interconnected web” of AI partnerships and are assessing whether these arrangements reinforce market power across the AI value chain. While many collaborations escape review, there are important exceptions. In particular, acquiring key assets, transferring employees with critical know how, or gaining strategic influence may amount to the acquisition of an “enterprise” or “material influence” and trigger regulatory jurisdiction under the merger control rules.
Recent CMA decisions show that employee transfers alone can, in certain circumstances, be sufficient to justify intervention.
Consumer protection and new regulatory powers
AI also raises significant consumer protection concerns, including:
- misleading outputs or “hallucinations”;
- dark patterns and subscription traps; and
- lack of transparency around algorithmic decision making.
The DMCCA has substantially strengthened the CMA’s enforcement toolkit. The CMA can now require firms to explain how algorithms operate, mandate testing of AI systems, and order disclosure of algorithmic information to consumers.
Importantly, regulators have rejected arguments that responsibility can be outsourced to AI vendors. Businesses remain accountable for AI generated outputs used in their products and services. In March 2026, the CMA published guidance on compliance with consumer law when using AI agents, which reaffirms that businesses remain fully accountable for their AI agents' actions and outputs under the DMCCA. Fines of up to 10% of their global turnover may be imposed for infringing the consumer protection regime.
What businesses should be doing now
AI competition risks are not being addressed in isolation. Authorities are collaborating internationally to intervene earlier than they have done previously in digital markets. Businesses that develop or deploy AI should take a proactive approach, including:
- updating competition compliance policies to expressly cover AI risks;
- implementing controls over pricing algorithms, data inputs and AI suppliers;
- monitoring whether algorithm feeding data includes market sensitive information;
- conducting regular audits and preserving audit trails;
- assessing merger control risk early when entering AI partnerships; and
- monitoring regulatory developments closely.
Competition law can also be used strategically. Where rivals deploy AI in an anti competitive way, businesses may raise concerns directly, complain to regulators, or pursue damages or injunctive relief.
Conclusion
AI offers extraordinary opportunities, but it also significantly raises the stakes from a competition and regulatory perspective. Regulators are determined to intervene early, often using familiar legal tools in novel ways.
Businesses that invest now in robust governance, transparency and compliance will be best placed to harness AI’s benefits while managing legal risk—and may gain a decisive advantage over less prepared competitors.
