Executive Summary

Co-opetition combines the advantages of competition and cooperation between firms to create new business opportunities. Large cloud providers and Generative AI (GenAI) developers engage in a co-opetition framework to make AI available to all.

Markets can deliver their full benefits in a co-opetition framework. Cooperation maximises opportunities and innovation by ensuring the development and deployment of AI models and applications. At the same time, competition acts as a safeguard, mitigating risks by exerting competition pressure on existing models and AI-powered applications developed or hosted by the cloud provider.

At this early development stage, the risks associated with co-opetition on investment, competition, and innovation remain largely theoretical and have yet to materialise. The most likely risks are competition risks due to potentially ant-competitive agreements, like sensitive information exchange, anti-competitive behaviours, like tying, bundling, and self-preferencing, and increased market concentration in the hands of large tech firms.

Swift market intervention to preserve the competition process is already under discussion. However, such an intervention is premature considering ongoing market studies on competition and GenAI and the rapid market and regulatory developments.

However, competition authorities should establish market and regulatory conditions conducive to ensuring positive competition outcomes for AI while preserving the incentive to innovate through co-opetition. They should propose a code of conduct applicable to all cloud providers based on principles of access, choice, non-discrimination, and flexibility.

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