A Primer on Gen AI and Competition Law in the Entertainment Industry: The Good, The Bad and The Ambiguous
A recent data from a study on professionals in the US film and television industry shows that an overwhelming majority of industry professionals and workers are concerned about the negative effects of Gen AI on the entertainment industry. The respondents to the survey flagged various concerns such as copyright infringements, anti-competitive data concentration, job losses, deep fakes, voice clones, and algorithmic biases among others. These concerns are prima facie an attack on the intellectual property rights (“IPR”) of the actors and creators but they also pose an equally potent threat to fair competition in the entertainment industry. The ability of Chat-GPT, a Gen AI application, to create poems, song lyrics, and screenplays is an illustration of the penetration of Gen AI in the entertainment industry. Thus, the unbridled use of Gen AI can seriously affect the human application of the mind and wipe out the role of human creativity. It may result in a situation wherein AI takes over the entertainment industry, leading to two-fold concerns of (i) losses of jobs for human creators and (ii) the promotion of poaching in the industry, for hiring technocrats specialised in handling complex Gen AI applications. Both ways, it is going to adversely affect fair competition in the market. The job losses due to the advent and advancement of Gen AI can lead to traditional firms losing their business and the workforce, hence, it may present concerns like AI-induced foreclosure. On the other hand, Gen AI will also create jobs for data scientists, technocrats, and skilled people trained in developing large language models. The popularity of AI and the associated investments and acquisitions in the Gen AI space are likely to develop a new relevant market for competitive assessment which is largely unexplored presently. Therefore, the benefits of Gen AI depend on how it is exploited, and democratising its access gains the utmost importance otherwise, the unleashed potential of Gen AI can also be used to suppress competition. Likewise, poaching can also produce pro-competitive effects as talent poaching in an extremely nascent industry can benefit employees as well as employers. It can lead to companies adopting better talent retention policies and such policies may drive innovation as a result of intra and inter-company competition.
The (mis)use of Gen AI in the entertainment industry can act as a catalyst for companies to strengthen the dominance of firms that control the necessary raw inputs, like cloud services and computing power, and potentially lock in business models that incentivise the endless surveillance of one’s personal data. Companies in the media and entertainment sector that that have the access to data can use that data for competitive advantage and at that same time they would have the ability to restrict the data flow to smaller and newer companies that will further strengthen their position of dominance.
Data: The Building Block for Gen AI & Raw Material for Anti/Pro Competitive Conducts
The peculiarity of Gen AI is its ability to create new content by employing vast amounts of data fed on its trained models. Data is the building block for Gen AI and the huge quantity of data required for the optimal use of Gen AI can be disturbing for the potential new entrants in the market. Simply put, the concentration of data with the established companies will create barriers to entry for a potential new entrant in the market. This is because firstly, they have the advantage of using the vast amount of user data accumulated over the years and secondly, they are likely to have more sophisticated data collection tools and technologies for acquiring and refining data that will also give them a competitive advantage over their rivals. This also holds for the entertainment industry as established companies and Over the Top (“OTT”) platforms can make use of accumulated data and Gen AI to cater to consumer preferences at the same time, it can be a disadvantage for the new entrants as the established firms may hinder data accessibility to their rivals. With the development of digital procedures in the entertainment industry and the expansion of digital viewership, it is also possible that the giants in the industry may entrench their market presence through the effective use of AI. Additionally, Gen AI can drag small competitors to elimination in the absence of ample data and advanced AI technologies that help in customising content based on consumer demands. In this regard, it is to be noted that Section 19 of the Competition Act, 2002 (“the Act”) provides for the factors that the Commission should take into account while investigating whether an entity has engaged in any anti-competitive conduct. Therefore, potential anti-competitive conducts fuelled by Gen AI including elimination of competition by creating barriers to entry and engaging in foreclosure strategies also come under the ambit of Commission’s assessment parameters under Section 19.
Gen AI in the Entertainment Industry: Will it Wipe Out Competitors?
Another competition law concern about the use of Gen AI is that it can facilitate anti-competitive agreements. As explained in the preceding paragraph, AI and more particularly, Gen AI thrive on input data. With greater data transparency, Gen AI can facilitate tacit collusion among the rivals which is per se anti-competitive. It can delve into methods or strategies that are anti-competitive and which dilute the fair use of the artistic or literary work done by professionals. It can also execute an anti-competitive strategy without human involvement thereby diminishing the competition intensity in the market. Furthermore, the use of same Gen AI technology by competitors can also facilitate communication among the rivals through trained chat bots. With its ability to execute anti-competitive covenants, Gen AI can promote unfair pricing and collusion which can impact workers in the creative industry. AI tools can be utilised to devise pricing algorithms that can facilitate discriminatory and predatory pricing. Likewise, algorithmic tacit collusion can also be achieved by the use of same AI software. Entertainment industry is not immune from dynamic predatory pricing and although these concerns are yet captured by the Commission, the existing provisions like Sections 3(3)(a) and 3(3)(d) must be read into to recognise these issues that may pose a significant challenge with further advancement and use of technology by the firms in entertainment industry. The aforementioned concepts are universally recognised anti-competitive practices covered under Section 2 of the Sherman Act and Section 3 of the Competition Act. The media and entertainment industry has witnessed a growing interference of Gen AI which is evident from the controversies surrounding Grammy Awards and AI-generated news reports. To tackle the diverse set of challenges presented by Gen AI, it is paramount that the regulations that are created to tackle the problems posed by Gen AI are not singularly focused on the IPR infringements but they shall also encompass the prevention of antitrust violations and protection of fair competition in the market. Popular examples of AI encroaching on the entertainment industry are Open AI’s DALL-E and Google’s Music LM which convert written prompts into high-resolution images and songs. Another competition law concern ensues from the excessive use of machine learning and AI tools to promote algorithmic bias. Online platforms employ these tools to affect as well as predict user’s choices. Targeting advertising so far as it predicts users’ choices based on their online activity does not raise a competition concern and may result in enhanced user experience and increased efficiency. However, there is also a counter-argument to targeting advertising that occurs in cases where companies attempt to influence user preferences. Competition concerns arise in cases of display advertising when the display side and the supply side of the advertisement are occupied by the same entity or its associates/affiliates. A prominent example of the above is the display advertising model of Google wherein it enjoys a dominant position in the market of display advertising through Google Ad Manager and Google Ads on the supply and demand side respectively. This sort of an arrangement can typically lead to self-preferencing wherein Google can leverage its market position to make its own products and services “more visible”. Google Shopping and Amazon Marketplace are examples of how AI can be used for self-preferencing wherein the European Commission observed that these companies are selling user data to third parties for advertising and also utilising the collected data to promote their products and services at the cost of downgrading the rival product listings. With the advent of Gen AI, dominant firms would have even better technological tools at their disposal that will allow them to employ big data analytics and create data-o-poly to the detriment of fair competition. Therefore media and entertainment companies having collaboration with Google can be the beneficiaries of targeted advertisings because of Google’s ability to influence user behaviour by self-preferencing models. It can lead to situations wherein companies not associated with Google can fall beyond the visibility of the consumers. Therefore, to tackle this situation competition authorities need to draw a distinction between legitimate business conduct and AI-induced anti-competitive behaviour.
Decoding Machine Monopoly & AI-Assisted Creativity: More losses than gains?
The easy use of Gen AI is feared to significantly impact human involvement in these creative processes, thereby impacting the workforce in the industry. Given the speed and efficiency of AI-generated creative content, it has the ability to wipe out certain sources of human employment in the industry. This can be in the form of bots replacing humans wherein the former is trained to provide solutions based on saved stimuli and prior user experience. Again, there are benefits that are also associated with the use of bots that include faster grievance redressal and tailored responses. It can also help creators generate concrete ideas and art by streamlining raw artistic thoughts and expressions. However, the increasing role of chat bots like Alexa and Siri that are even equipped to provide emotional support, it is not impossible for bots to further reduce human involvement in future. Furthermore, the unbridled use of Gen AI also raises another potent competition law concern i.e. exclusionary conduct that could be exploited by companies having deep pockets to the detriment of their rivals and new entrants. Thus, it can be an illustration of AI-induced foreclosure of competition in the entertainment industry. As data is crucial for the optimal use of AI, restricting access to data or degrading the quality of exported data would incentivise dominant entities to have a competitive advantage over their competitors and thus, it would also lead to foreclosure of competition. AI-generated algorithm is another example that can result in foreclosure of competition. These algorithms can be used by music streaming and over-the-top platforms to engage in self-preferencing activities that can hurt other artistic works by reducing customer interactions. At this juncture, it is also pertinent to understand the interplay between competition law and IPR. It comes into play when AI tends to substitute human artistic efforts. Thus, monopolisation of creative work by machines and AI must be discouraged and several lawsuits have been filed by creators all around the globe seeking protection of their IPR. The more the protection of human-generated content under IPR laws, the lesser the influence of AI-induced threats of monopoly. Therefore, IPR and competition must co-evolve in the AI era to strengthen the hands of creators so that they do not fall prey to the adverse impact of technologies. That said, Gen AI introduces a new competitive force in the entertainment industry apart from the ongoing competition. Usually, an increase in competition encourages market players to incentivise users and promotes fair play. However, this is not the case with Gen AI because of its ability to resemble human-generated content which can lead to the foreclosure of businesses in the entertainment industry. However, this is not the only reason for attributing foreclosure to Gen AI. Its ability to produce content in no time can also imbalance the demand-supply curve which possibly human efforts won’t be able to match. Given the mode and manner of using Gen AI, it has the potential to reduce production costs to an extent that can further disrupt demand-supply cycles.
Search Costs: Cementing the Competition Concerns
With AI-generated production shooting high, the significance of curation vis-a-vis that of creation shall also increase. Owing to the fact that Gen AI will make content creation easier, it is undeniable that it will increase search costs. At the same time, increased search costs also imply that existing artists shall have a competitive advantage over the new ones who will be fighting wars on a dual front i.e. one with the old and established entities and the other with the novel AI-generated content. This entire tussle is more likely to be seen in sectors like music streaming and OTT and will eventually harm competition and aid the established companies in further dominating the space.
Putting Together the Benefits of Gen AI for the Entertainment Industry
As discussed in the earlier sections of this article, the application of Gen AI in the entertainment industry is not completely negative. Indeed, it has assisted the creative process by channelising efficiency, speed, and quality of delivery. In this respect, the impact has been more or less similar in all the departments like television, books, gaming, films, and music. The virtual reality gaming option, GTA - VI appears to be one such example of how AI can enhance user experience and design a user-friendly interface. The use of AI does not require one to be highly tech-savvy and the increased use of AI models in the entertainment industry is obviously helping in the generation of novel ideas based on crude input, both timely and efficiently. It can help the producers in designing marketing strategies and consumer-centred promotion activities. It can increase production efficiency and improve the quality of images and graphics, a tool that is of extreme importance in the entertainment industry. Additionally, from a competition point of view, the open-access nature of Gen AI has introduced new people to the industry and has resulted in reduced barriers to entry. New-age story writers, poets, graphic designers, and singers are assisted and fuelled by the rightful use of Gen AI such as the conversion of writing prompts, analysis of music compositions, and rich vocabulary.
Conclusion & the Way Forward
Despite all the competitive drawbacks discussed, human-generated content is a unique blend of creativity, accuracy, and precision that algorithmic content might lack. Additionally, the socio-cultural aspects and the changes therein can be best appreciated by human brains rather than pre-fed algorithms. In this respect at least, the reliability and dynamism of human-generated content have a competitive edge over their AI counterparts.
Considering the pros and cons, it is imminent that the use of AI in the media and entertainment industry be well regulated. It is undeniable that Gen AI has the potential to severely affect the industry in multiple ways. However, to keep its negative aspects in check, it is paramount that appropriate regulations must be floated to ensure that intellectual property and competition infringements do not outweigh the positive side of AI. Governments must strike a fine balance between incentivising technical innovation in the form of promoting Gen AI models and safeguarding original human creativity.
As of yet, there is no concrete regulation on the use of Gen AI in the media and entertainment though positive intent has been shown by several countries. To begin with, it may be appropriate for developing countries like India to have soft laws in the form of non-binding guidelines in place. As the country is rapidly transitioning in terms of economy and digitalisation, having soft laws can help in gathering the industry response and inducing a mechanism for self-regulation for established companies. A self-regulatory mechanism such as mandatorily constituting an expert AI Committee in the companies to assess the competitive significance of any AI-driven business strategy can be a crucial step in preventing the overreach of AI so as to remain competitively lawful.
Another important legislative suggestion requires the introduction of “collective dominance” under Section 4 of the Act. It is because, in the absence of any express agreement, it becomes quite difficult for the Commission to get hold of tacit collusion by competing firms as they make use of AI to recognise competitive actions and in response, operate in tandem to harness benefits arising from that coordinated behaviour, either intentionally or unintentionally. Recognising the concept of collective dominance in the Act would enable the Commission to tighten its grip on this algorithm-driven anti-competitive coordination in digital markets. As deliberated upon in the above paragraphs, an example to illustrate this algorithmic coordination is the dynamic pricing in the market for cab aggregators.
Moreover, it may be appropriate for the Commission to frame rules to govern the use of AI so as to prevent competitive threats such as algorithmic collusion, exclusionary conduct, and barriers to entry. Additionally, taking guidance from Germany, the Commission may also consider putting third-party AI providers under its scanner if they are found to be promoting abuse of algorithms. The Commission can also refer to the European Union and the United Kingdom on the treatment of AI under competition law. It is noteworthy that while the European Commission has proposed an AI Act to tackle the competitive concerns arising out of the use of AI, the Consumer and Markets Authority (“CMA”) has initiated a probe to study the impact of AI models on competition law. As the Indian markets contemplate the Digital India Act, legislative interventions to tackle the ill-effects of AI under the proposed Act would be a right step in the right direction. Lastly, it is appreciated that the Commission has initiated a market study to holistically delve into the intersection of AI and competition law. The core competition concerns that affect the entertainment industry as discussed, can be rightly regulated by these legislative and policy developments which would help the Commission to promote the optimal use of Gen AI while minimising any antitrust concerns.
Therefore, in light of the impact and concerns discussed in this article, it is apposite to have a well-drafted regulation governing the nature, manner, and extent of Gen AI in the media and entertainment sector so that the former’s role can be restricted to that of a supporting actor rather than a main actor.
This article has been authored by Ayush Raj, a fourth-year student at National Law University, Nagpur. This blog is a part of RSRR’s Blog Series on 'Traversing the Intersectionality of the Entertainment Industry and Generative Artificial Intelligence', in collaboration with The Dialogue.
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