Federal Cartel Office

AI as an accelerant for market concentration

AI is the next challenge facing competition authorities worldwide. Andreas Mundt, President of the Federal Cartel Office, views AI as an accelerant for market concentration.

AI as an accelerant for market concentration

In the fight against the market power of Apple, Google, Microsoft etc, the Federal Cartel Office in Germany has already fought many battles. Nevertheless, Cartel Office President Andreas Mundt views the growing importance of Artificial Intelligence (AI) with concern: „From a competition perspective, AI is an accelerant of the first order “, said the agency's chief at the presentation of the 2023/24 annual report.

While the digital world is today already dominated by Big Tech, the major US companies have so far been „only“ the gatekeepers of their ecosystems. With AI, Mundt believes, there will in future no longer be any „gate“. Instead, there will only be closed ecosystems. The consequence will be reduced choice for consumers.

One must consider the dimensions. Chip designer Nvidia and Big Tech together account for two-thirds of global investments in AI. There is a risk that digital markets will further concentrate and „market growth will occur at different stages of value creation, from chips to the front end.“

On the learning curve

From a competitive perspective, it is essential to break up these ecosystems. Cartel authorities worldwide are working on this issue, even though there have been no proceedings on this matter so far. „We are on a learning curve“, said Mundt. Initially, the focus is mainly on defining the risks. Mundt considers it a success that the Federal Court of Justice fully confirmed the overwhelming cross-market significance of Amazon, as determined by the authority. This provides strong momentum for the seven ongoing proceedings, according to the Cartel Office President.

District heating sector

According to Mundt, there is no need for new tools to combat market abuse in the AI-dominated digital economy. However, he sees things differently in the case of district heating. Here, the Bonn-based authority is currently conducting six pilot proceedings against district heating suppliers. The investigation focuses on whether price adjustment clauses were used appropriately. District heating is a classic monopoly market where customers cannot switch providers. Therefore, the Cartel Office chief calls for some light regulation. Legislators must establish clear rules and structures for pricing. With expanded powers and resources, the Cartel Office could then ensure their enforcement.

Mundt's own assessment of the Cartel Office proceedings is positive, saying that it is now running on efficient tracks again. However the figures for imposed fines tell a different story. In 2023, only 2.8 million euros in fines were imposed – the lowest figure in decades. Mundt attributes this to the consequences of the pandemic, during which searches could hardly be carried out. In contrast, eleven actions took place in 2023, with two more in the current year so far.