1

WHAT’S AI GOT TO DO WITH IT?

Competition Policy, Artificial

Intelligence & Healthy Markets
Submission to the Competition Bureau

July 2024

Prepared by

Tamara O’Connell
Edward Wu
Alayna Kolodziechuk (with thanks to Léo Bourgeois)
Renee Black (with thanks to Mahtab Laghaei)

With thanks to Jennifer Quaid (Associate Professor, Faculty of Law (Civil Rights Section) at
the University of Ottawa) and Keldon Bester (Executive Director, Canadian Anti-Monopoly
Project) whose expertise on competition policy and adjacent areas - including criminal law -
helped inform GoodBot’s areas of focus and analysis.

In response to the White Paper and Request for Feedback on Artificial Intelligence and
Competition launched by the Government of Canada’s Competition Bureau in the spring of
2024.
 2

INTRODUCTION 3

PART 1: MERGERS & ACQUISITIONS 5

PART 2: DECEPTIVE MARKETING 8

PART 3: PRICE FIXING & ALGORITHMIC OBFUSCATION 11

PART 4: VALUE CHAIN CONSIDERATIONS 12

APPENDIX A: LAWSUITS & EMERGING ISSUES 15

 3

INTRODUCTION
The purpose of Canada's Competition Act is to “maintain and encourage competition in Canada” in
order to “promote the efficiency and adaptability of the Canadian economy and to provide
consumers with competitive products and product choices.” Artificial intelligence (AI) introduces
complex new market dynamics that impact businesses and consumers in ways that can threaten
market efficiency and adaptability. These issues and risks demand attention from policymakers and
competition authorities.

The competition context is complicated by two urgent and intersecting factors: (1) AI has
far-reaching, transformative and potentially dangerous applications, and (2) failure to take
immediate policy and regulatory actions risks allowing companies that already dominate the tech
sector to extend their dominance into AI as well.1 Moreover, AI introduces new vehicles to extend
dominance in existing markets where they already hold asymmetric and anti-competitive
advantages. It also creates potential for those same companies to expand reach and dominance into
new spaces adjacent to existing business lines and products.

Current laws are ineffective at detecting and addressing both anti-competitive impacts of AI and
anti-competitive behaviour obscured by AI. These circumstances require attention from authorities
responsible for promoting conditions for healthy market dynamics, meaningful choice and informed
consumers. Without mandatory transparency obligations to shine a light on AI systems, it may be
impossible to ensure that AI practices align with existing laws and democratic values.

Secondary market economies such as Canada have (at least currently) a more limited toolbox at
their disposal when it comes to competition issues for companies headquartered outside its
borders. Given the global impacts of AI and particular challenges for secondary market economies,
a coordinated approach between Canada and other jurisdictions will be beneficial and necessary.

To advance these efforts, Canada should explore distinct transparency obligations for actors of
different types, sizes and control levels along value chains. This includes obligations to limit risk of
technology companies extending power in existing value chains via AI in ways that limit competition
and affect consumers. This is especially important where organizations have control over multiple
layers and segments of AI value and supply chains, within which companies can exploit
conflicts-of-interest and power asymmetries to extend market dominance.

Different obligations are required to address different actors in the AI system. This includes “AI
providers" who develop large scale machine learning models, such as generative AI, and “AI deployers”
who use AI systems procured from AI providers to provide customer-facing AI products or services.
Attention must be given to addressing risks of unregulated AI markets being used to enable

1
Sitaraman, Ganeshl Foster, Natalie, How States Can Keep Big Tech from Dominating AI. Politico. March 13,
2024. https://www.politico.com/news/magazine/2024/03/13/states-big-tech-ai-00146338
 4

consumer deception and obfuscate problematic decision-making processes2 in ways that harm
consumers, intermediaries and markets.

Introducing transparency obligations can strengthen access to urgently needed data to identify,
address and prevent anti-competitive outcomes and to hold companies accountable when
competition is undermined. Complementing these obligations with better enforcement to hold
companies accountable can advance a more robust competition agenda. Authorities should monitor
and follow global peers in conducting proactive market research to understand the effects
transactions could have and explore how they are moving to enforce these laws.

As AI technologies continue to evolve rapidly, maintaining a flexible and adaptive regulatory

approach will be crucial in order to balance the promotion of innovation with the protection of fair
competition in Canadian markets.

GoodBot’s Submission
GoodBot’s submission to the Competition Bureau explores the changing marketplaces dynamics as
a result of AI and focuses on four issues that are inadequately addressed in current competition law.

First, we explore how companies use limits and transactional structures (such as partnerships) to
circumvent merger rules, in ways that result in both de facto control and anti-competitive results
that merger rules seek to prevent. The existing requirements can result in significant gaps in
oversight. If, for example, a singular transaction that would otherwise be notifiable were to instead
be structured as a series of transactions, it may result in no transaction in the series being required
to be reported. A more responsive approach is needed to address these oversight gaps and the
consolidation of power that has escalated in the last decade.

Second, we discuss deceptive marketing practices – including the use of materially false or
misleading content – that prevent consumers from making informed decisions, and which
disadvantage honest competitors. Creating AI-enabled deceptive content is easy and cheap. It now
complicates consumers’ ability to distinguish AI from human-generated content and thereby their
ability to make informed decisions.

Third, we explore how complex interactions of multiple AI systems can increase the scope and ease
with which businesses obscure practices that are tantamount to price fixing. Lack of transparency on
AI systems makes detection of these unlawful practices all the more difficult.

Fourth, we discuss how lack of transparency across value chains enables power asymmetries and
conflicts-of-interest and leads to the obfuscation of harmful and anticompetitive practices. We also
discuss how the normalization of fake assets compromises healthy markets and enables customers
deception, disinformation, fraud and other harms.

2
Molnar, Patricia. Why Are Migrants Becoming AI Test Subjects? Centre for Humane Technology. June 20, 2024.
https://www.humanetech.com/podcast/why-are-migrants-becoming-ai-test-subjects-with-petra-molnar
 5

Bridging these gaps requires updating of statutory definitions, strengthening accountability and
transparency measures, and clarifying businesses and platforms obligations to address problematic
practices and outcomes that have resulted from decades of weak policy enforcement. This includes
measures that may be perceived as burdensome in the short term, but that can create healthier
market dynamics in the long run.

GoodBot believes that effective public policy can enable a wave of responsible innovation by creating
a context in which honest competitors can meaningfully compete. Competitive markets and
informed consumers are necessary to ensuring AI aligns with public interest, and by extension,
democratic values. Failing to address unhealthy market dynamics will harm consumers and markets.

As policy options are explored, it is important to consider how new regulations risk disadvantage
smaller players while entrenching dominance for larger ones. Addressing these risks may require
more substantive obligations for anti-competitive companies to help level the playing field.

PART 1: MERGERS & ACQUISITIONS

Canada is a global leader in AI research and development,3 but the regulation of powerful
technologies and AI lags. Competition law should encourage a market with healthy competition and
few barriers to entry. The issue is that larger companies and early adopters in the AI sector are
tending to acquire newcomers and serious competitors alike leading to concentration in the market
and the weakening of overall competition. The Competition Act,4 while seeing amendments in recent
years, is still ineffective at addressing the potential impact of monopolies in the AI sector. If, for
example, a singular transaction that would otherwise be notifiable were to instead be structured as a
series of transactions, it may be the result that no transaction in the series would be subject to
reporting requirements before the Bureau. Further amending the merger and acquisition provisions
is one way to protect public interest and preserve competition in the AI sector.

#1: Calling for the creation of a more effective threshold for AI-related
mergers
We support the C-59 amendment, which includes “sales from, in, and into” Canada, among
notification-required mergers.5 Even so, the AI sector and its sub-markets are still relatively new,
with many early-stage companies vulnerable to acquisition by large tech companies, which
continue to build dominance in a range of online ecosystems through vertical and horizontal
acquisitions. Lowering the transaction notification threshold for AI related transactions is vital to
protect long term public interest. The lowered threshold likely makes it more difficult for existing
tech companies to avoid threshold obligations and additional monitoring. The United Kingdom has

3
Willis, Z. (2023, October 4). Canada could be left behind in the new AI revolution. KPMG.
https://kpmg.com/ca/en/home/insights/2023/10/canada-could-be-left-behind-in-the-new-ai-revolution.html
4
Competition Act (Canada), R.S.C., 1985, c. C-34
5
Competition Act (Canada), R.S.C., 1985, c. 34, s. 109(1)(b)
 6

lowered the transaction threshold to £25 million, lower than the Canadian threshold of $93 million.6
The new threshold would increase the Bureau’s ability to review transactions and intervene if
necessary to fulfil its mandate of a fair and competitive market.

#2: Calling for the establishment of specific controls for AI partnerships

The United Kingdom Competition & Markets Authority (CMA) has used its position to investigate AI
partnerships between Microsoft and Mistral for the licensing of Mistral AI foundation models. This
partnership is not captured by the existing definition of mergers or joint ventures, at least until
Microsoft has de facto control or material influence over Mistral’s commercial decisions.7 Yet CMA
highlights this risk in its AI Foundation Models Technical update report where it emphasized that the
client expectation of “high returns to scale of data, high levels of personalization, or network effects”
can create a concentrated market with few players.8 The EU’s competition authority is also exploring
whether Microsoft's partnership with OpenAI and Google's partnership with Samsung is or could be
anti-competitive and what steps are needed to detect and address those risks.9

Although “merger” is broadly defined in the Competition Act to include transactions that result in
acquisition of control of a significant interest in a competitor, and “control” is defined, what
constitutes a “significant interest” is absent.10 In recognition of the gap, the Bureau’s Merger
Enforcement Guidelines include a description for significant interests and a number of factors that
the Bureau may consider, individually or collectively, when assessing whether an interest does
constitute material influence. The Guidelines are helpful, however are not legally binding and lack the
certainty and predictability that would come with an amendment to the Act itself. Defining
“significant interest” to include quantitative and qualitative indicators that there is material
influence over economic decisions would better ensure that market concentration arising from
structures like partnerships and joint ventures are not overlooked by the Bureau.

#3: The Competition Bureau should initiate a study of the AI sector

The US Federal Trade Commission has launched a market inquiry relevant to “Generative AI
Investments and Partnerships” between Microsoft and Alphabet and AI providers OpenAI and
Anthropic.11 In particular, the FTC would like to analyze the influence caused by partnerships
between traditional tech companies and AI providers and whether such partnerships, due to
network effects, have resulted in noncompetitive behaviour. The parliament's recent amendment to

6
Digital Markets, Competition and Consumers Act 2024 (United Kingdom), c. 13, s. 57(2)(b)
7
Authority, C. a. M. (2024, May 21). Microsoft / Mistral AI partnership merger inquiry. GOV.UK.
https://www.gov.uk/cma-cases/microsoft-slash-mistral-ai-partnership-merger-inquiry
8
Competition & Markets Authority (United Kingdom). (2024). AI Foundation Models Technical update report.
https://assets.publishing.service.gov.uk/media/661e5a4c7469198185bd3d62/AI_Foundation_Models_technical_
update_report.pdf
9
White, Aoife, Microsoft and Google AI deals get EU antitrust scrutiny, Vestager says. Politico. June 28, 2024.
https://www.politico.eu/article/microsoft-google-tech-deal-antitrust-security-open-ai-eu-margrethe-vestager
10
Competition Act (Canada), R.S.C., 1985, c. 34, s. 91
11
FTC Launches Inquiry into Generative AI Investments and Partnerships. (2024, January 25). Federal Trade
Commission.
https://www.ftc.gov/news-events/news/press-releases/2024/01/ftc-launches-inquiry-generative-ai-investments-p
artnerships
 7

the Competition Act (Section 10.1(1)) provided the Commissioner with the ability to initiate market
studies.12 The Bureau would benefit from taking similar actions to understand the AI sector with a
view to developing a more comprehensive competition framework that improves existing policies
including merger controls and updated Merger Enforcement Guidelines with specific AI
considerations.

#4: Canada needs an ex-ante competition policy to promote a more

competitive AI market
An outdated competition policy can promote non-competitive behaviours and incentivize certain
competitors to circumvent existing merger control rules. The European Union and the United
Kingdom have enacted ex-ante laws to impose regulations on AI and digital markets, partly
responding to the fast innovation in the technology sector. For example, the EU has proactively
enacted the Artificial Intelligence Act and the Digital Markets Act aiming to ensure a fair and
competitive market in responding to new technologies.13 This approach is in contrast to the “ex-post
antitrust intervention” approach adopted by many other countries and it provides the EU with a
powerful tool to be a gatekeeper, setting out limits and boundaries to ensure a fair market and
protection of certain fundamental values.14 Other countries, including Japan and Australia, are also
considering an ex-ante approach.15 The ex-ante regulation approach would not appear to hinder
technological innovation; rather, it can protect public interest against the unknown future and
provide a clearer picture of the competition landscape and, therefore, better information as to how
regulation can limit problematic effects that not only harm markets but also risk impacting
democratic values.16

#5: Merger rules should address barriers to entry issues in the AI market
The AI market sector includes the infrastructure (supercomputers, datacentres, etc.), service
providers (such as OpenAI), and AI deployers (companies using AI tools to build their own
applications). The market concentration that exists among those developing AI foundation models
could result in the effect of a monopoly, as only few companies have the resources and access to
the necessary “cloud infrastructure, advanced chips, data and expertise needed.”17 If this trend
continues, barriers to entry issues can be expected as other companies struggle to compete against

12
Competition Act (Canada), R.S.C., 1985, c. 34, s. 10.1(1)
13
Jakob, M. J., Vid, L., David, L., & Marko, J. (2024). AI Act: Ex ante problems of ex ante regulation. Zenodo.
https://doi.org/10.5281/zenodo.10875497; André, M. T. (2022, November 23). Digital Markets Act | Think tank |
European Parliament. https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2021)690589
14
Dentons LLP. (2022, December 7). EU Digital Markets Act: next steps and long-term outlook.
https://www.dentons.com/en/insights/articles/2022/december/7/eu-digital-markets-act-next-steps-and-long-ter
m-outlook
15
Crosswell, S. (2024, June 12). Digital Markets: regulation or innovation in Asia-Pacific? | PYMNTS.com.
PYMNTS.com. https://www.pymnts.com/cpi-posts/digital-markets-regulation-or-innovation-in-asia-pacific
16
Srinivasan, Dina. Why Google Dominates Advertising Markets Competition Policy Should Lean on the
Principles of Financial Market Regulation. Stanford Technology Law Review. Fall 2020.
https://law.stanford.edu/wp-content/uploads/2020/12/Srinivasan-FINAL-Why-Google-Dominates-Advertising-Ma
rkets.pdf
17
Von Thun, M. (2023, November 29). Monopoly power is the elephant in the room in the AI debate. Tech Policy
Press. https://www.techpolicy.press/monopoly-power-is-the-elephant-in-the-room-in-the-ai-debate
 8

the existing oligopolies. Requiring fair access rights to infrastructure and datasets can help mitigate
negative effects where market concentration is strong.

Canada should move toward a more comprehensive approach to merger controls, that both
strengthens enforcement capacity but also explores proactive measures to understand the effects
on markets. Existing rules and recent amendments are helpful but insufficient to address the unique
challenges in the AI market. Further rule changes may be needed to achieve a truly competitive AI
market that benefits Canadians while promoting innovation.

PART 2: DECEPTIVE MARKETING

The use of AI for automation and the ability of generative AI to create content both present
opportunities for exploitation by parties engaging in deceptive marketing. Deceptive marketing is
anti-competitive and can have serious economic consequences. Deceptive marketing should be
curtailed to protect the competitive market from being manipulated to mislead consumers and to
protect honest business competitors who are engaging in honest promotional efforts.18

Under Canadian law, deceptive marketing behaviour includes representations to the public that are
materially false or misleading.19 The use of AI-generated content in a marketing context can create
a materially misleading representation, particularly when consumers cannot distinguish between
AI-generated content and human-generated content. As AI-generated text, images and videos
become more prevalent and realistic, there is a need for increased transparency and accountability
around AI-generated outputs to allow consumers to differentiate between AI-generated and
human-generated content and make properly informed purchasing decisions relating to the product
or service being advertised. Furthermore, the use of AI systems can amplify traditional deceptive
marketing practices by allowing bad actors to more quickly and cheaply proliferate deceptive
marketing activities across a wider audience.

The potential for anti-competitive outcomes being created and amplified by the use of AI
necessitates a policy response to increase transparency regarding the use of AI systems in Canadian
businesses’ marketing activity, and to provide mechanisms for the accountability of AI providers and
AI deployers.

The inherently misleading nature of AI-generated content means that its use in marketing contexts
should be expressly identified. This can be achieved by requiring that any marketing content that
includes an output of an AI system be marked as such, in a manner that effectively informs
consumers. Failure to properly mark AI-generated content should constitute a prohibited
misrepresentation to the public. By curtailing deceptive marketing, competitive harms will be
reduced. Such changes will also provide a secondary benefit to the public and consumers by
protecting them from unfair business practices.

18
False or Misleading Representations and Deceptive Marketing Practices
https://competition-bureau.canada.ca/deceptive-marketing-practices/types-deceptive-marketing-practices/false-
or-misleading-representations-and-deceptive-marketing-practices
19
Competition Act, 74.01 (1)(a)
 9

Other jurisdictions have implemented transparency obligations that can provide guidance on this
issue. The European Artificial Intelligence Act (“EU AI Act”) came into effect in May 2024 and imposes
mandatory marking or labelling of AI-generated content, applicable to all AI systems or their outputs
used within the European Union. The outputs of these systems are required to be marked as
“artificially generated or manipulated” in a machine-readable format.20

The transparency obligations in the EU AI Act are intended to address dangers inherent in the
difficulty of differentiating human-generated content from synthetic content generated by AI. These
dangers include the potential for deep fake content (i.e., manipulated or synthetic audio or visual
media that seem authentic) in fuelling disinformation and misleading content.21

In Canada, the Competition Bureau, headed by the Commissioner of Competition (“Commissioner”),

is an independent law enforcement agency of the Federal Government of Canada with a mandate to
protect and promote competition for the benefit of Canadian consumers and businesses. The
Competition Bureau is responsible for the administration and enforcement of Canada's Competition
Act and certain other legislation.22 The Competition Tribunal is an independent adjudicative body
that has jurisdiction to hear and dispose of certain matters under the Competition Act.23

The purpose of Canada’s Competition Act is to maintain and encourage competition in Canada,24 and
it contains provisions prohibiting certain reviewable business conduct. Reviewable conduct may be
investigated by the Competition Bureau and brought before the Competition Tribunal by the
Commissioner for enforcement.25

The deceptive marketing provisions of the Competition Act currently include, as reviewable conduct,
representations to the public that are false or misleading in a material respect to promote the supply
or use of a product or any business interest.26 If a representation could influence a consumer to buy
or use the advertised product or service, it is considered to be material. To determine whether a
representation is false or misleading, the Competition Tribunal and courts consider the “general
impression” it conveys, as well as its literal meaning.27

20
“Providers of AI systems, including general-purpose AI systems, generating synthetic audio, image, video or
text content, shall ensure the outputs of the AI system are marked in a machine-readable format and
detectable as artificially generated or manipulated. Providers shall ensure their technical solutions are effective,
interoperable, robust, and reliable as far as this is technically feasible, taking into account specificities and
limitations of different types of content, costs of implementation, and the generally acknowledged
state-of-the-art, as may be reflected in relevant technical standards.” EU AI Act (Art. 50 2)
https://www.europarl.europa.eu/doceo/document/TA-9-2024-0138_EN.pdf
21
https://www.europarl.europa.eu/RegData/etudes/BRIE/2023/757583/EPRS_BRI(2023)757583_EN.pdf
22
A New Era for Competition: Driving Affordability and Economic Growth. Government of Canada.
https://publications.gc.ca/collections/collection_2023/isde-ised/Iu50-2023-eng.pdf
23
Competition Tribunal, Government of Canada. https://www.ct-tc.gc.ca/en/tribunal/mandate.html
24
Competition Act, 1.1
25
Note that recently-enacted Bill C-59 provides for the ability of private parties to bring proceedings on
reviewable conduct before the Competition Tribunal. Bill C-59, Government of Canada.
https://www.parl.ca/DocumentViewer/en/44-1/bill/C-59/royal-assent
26
Competition Act, 74.01 (1)(a)
27
False or Misleading Representations and Deceptive Marketing Practices
 10

Under the civil regime of the Competition Act, the general provision prohibits all materially false or
misleading representations.28 Specific false or misleading representations are also enumerated,
including prohibitions on the sale of a product above its advertised price (e.g., drip pricing),
performance representations that are not based on adequate and proper tests, misleading
warranties and guarantees, false or misleading ordinary selling price representations, untrue,
misleading or unauthorized use of tests and testimonials, and bait and switch selling.29

The deceptive marketing provisions of the Competition Act should be amended to include express
language that a representation to the public that fails to properly mark content that has been
generated using an AI system constitutes a false or misleading representation, thereby making
such a representation reviewable conduct. Similar to the requirements laid out in the EU AI Act, the
marking should be required to be in a machine-readable format and detectable as artificially
generated or manipulated. In addition, the marking should be required to be human-readable so
that a consumer can easily and immediately recognize that marketing material contains
AI-generated content. In this manner, any output of AI systems that is used in marketing materials
will be marked in such a way that consumers are not misled in a material way, since consumers will
be able to differentiate between AI-generated and human-generated content and make an informed
choice on whether to buy or use the product or service being advertised.

Any Competition Act amendments that speak to the output of an AI system will necessitate a
legislative definition of what qualifies as an “AI system”. In this respect, the definition of “artificial
intelligence system” proposed under Bill C-27 in the Artificial Intelligence and Data Act ("AIDA") can be
used as a guide: "artificial intelligence system means a technological system that, autonomously or
partly autonomously, processes data related to human activities through the use of a genetic algorithm,
a neural network, machine learning or another technique in order to generate content or make
decisions, recommendations or predictions.”30 According to Innovation, Science and Economic
Development Canada (ISED), the definition of “artificial intelligence system” in AIDA aligns with
concepts developed through the Organization of Economic Co-operation and Development (OECD)
that are also represented in the EU AI Act.31

Prohibiting the use of unmarked AI-generated content in marketing material will reduce deceptive
marketing and promote competition in Canada, achieving the intersecting policy goals of consumer
protection and supporting the Competition Bureau’s mandate to provide consumers with
competitive prices and product choices.32

https://competition-bureau.canada.ca/deceptive-marketing-practices/types-deceptive-marketing-practices/false-
or-misleading-representations-and-deceptive-marketing-practices
28
Competition Act, 74.01 (1)(a)
29
Competition Act, 74.01
30
Bill C-27, Government of Canada. https://www.parl.ca/DocumentViewer/en/44-1/bill/C-27/first-reading
31
The Artificial Intelligence and Data Act (AIDA) – Companion document
https://ised-isde.canada.ca/site/innovation-better-canada/en/artificial-intelligence-and-data-act-aida-companion
-document
32
Competition Act, 1.1
 11

PART 3: PRICE FIXING & ALGORITHMIC

OBFUSCATION
The risk of dominant market positions is that they can be abused through the use of predatory,
exclusionary or disciplinary business tactics (such as predatory pricing, price fixing and price
coordination) to exclude or eliminate competitors. With more businesses leveraging AI to assist in
business and economic decisions, the risk of price fixing that already exists in the context of
computer algorithms is now exponentially more serious. (Calvano et al. 2020) is the first study to
explore how and why prices set by AI systems might differ from static equilibrium predictions.33 Not
only can the use of AI systems increase the scope and ease with which businesses are able to fix
prices, but the black box nature of AI systems is a compounding factor as it further frustrates the
detection and prevention of anti-competitive practices.

Marketplace and other platforms are likely to employ their own algorithmic systems which in turn
interact with those of businesses. Through a series of controlled alterations of the baseline
algorithms in a study by Decarolis, et al it was detected that “it is the feasibility of dynamic strategies
entailing the possibility of punishment reward schemes that drive the tendency of the most
data-intensive algorithms to coordinate on lower bids.”34 Researchers considered the generalizability
of their experimental results by considering three dimensions along which to extend results.
Compellingly, all extensions were found to lead to the same qualitative outcome.35 Platforms have
significant power in this equation–they are a key access point to consumers, and many control
advertising and hold troves of user data. The level of information made available by platforms to
third party AI systems is likely to shape the type and nature of AI systems used by third parties in
such interactions.36

Decarolis, et al point to other trends that are resulting in even more obfuscation effects. One such
example involves Google providing less detailed information to advertisers in search term reports
regarding the performance of their ads. This is significant in that Google’s restrictions on its own
data seems to have resulted in anti-competitiveness within the sub-market of search engine
managers (where, now without access to the same information, third party providers have largely
gone out of business.)37

Data privacy protection has been pointed to by Google as the reason for increased restrictions.38
Convenient scapegoat or not, the interaction between data privacy laws and competition laws, two
regimes experiencing significant legal activity around the world, is complex and should be more

33
Artificial Intelligence & Data Obfuscation: Algorithmic Competition In Digital Ad Auctions (Decarolis, Rovigatti,
Rovigatti and Shakhgildyan, Centre for Economic Policy Research, 2023)
34
Ibid
35
Ibid
36
Ibid
37
Artificial Intelligence & Data Obfuscation: Algorithmic Competition In Digital Ad Auctions (Decarolis, Rovigatti,
Rovigatti And Shakhgildyan, Centre For Economic Policy Research, 2023)
38
Ibid
 12

closely studied. It will be important to at least consider the anti-competitive effect of such practices,
whether intended or not, and regardless of the purpose for which they may have been introduced.

In Europe, it is of note that the proposed EU AI Act includes provisions for high-risk AI systems, which
could encompass those used in pricing decisions. In the US, the FTC has considered the impact of
dynamic pricing and dynamic difficulty in games. The relationship between difficulty, the availability of
in-game purchases and at which price requires further attention. In the case of in-game economies
with their own “currencies” the real price paid is abstracted which can act as an obfuscation tactic.

To address these challenges noted in the above section, the Bureau should:
● Continue to engage with stakeholders and experts to deepen understanding of AI's impact
on Canadian markets
● Update the Competition Act to explicitly address AI-facilitated anti-competitive practices
particularly as it relates to price fixing and dynamic algorithmic practices
● Develop guidelines for businesses on the use of AI in pricing and market decisions
● Introduce enhanced scrutiny of AI systems used in pricing and market decisions
● Collaborate with international counterparts to develop best practices for regulating AI in the
anti-competition context
● Thoughtfully consider the interplay between data privacy laws and competition laws both in
Canada and internationally
● Consider competition laws in conjunction with other applicable laws such as Artificial
Intelligence and Data Act (proposed as part of Bill C-27), Personal Information Protection and
Electronic Documents Act (PIPEDA), and Consumer Protection Acts (provincial legislation)
● Invest in technical capabilities to detect and analyze potential AI-driven anti-competitive
behaviour

The Competition Bureau's discussion paper highlights important concerns about AI's potential
impact on competition such as the potential proliferation of AI-facilitated price fixing, price
coordination and algorithmic obfuscation. Regulators may need to be creative in their approach - for
example, technology that could detect and analyze potential AI-driven anti-competitive behavior
might help address some but not all concerns (as of writing, there is no indication of such technology
existing). Businesses would also benefit from guidelines that speak to permitted/restricted uses for
AI in pricing, market decisions, etc. Given the global impact that AI is already having on competition,
collaboration and coordination among international counterparts would allow for more
harmonisation between approaches.

PART 4: VALUE CHAIN CONSIDERATIONS

Market Control, Conflict of Interest & Transparency

Lack of transparency around AI creates conditions that lead to the obfuscation of problematic and
anticompetitive practices, which are further complicated by companies that hold market dominance
in complementary spaces.
 13

For example, online advertising markets are dominated by Google, which simultaneously operates
the leading trading venue and the leading intermediaries that buyers and sellers go through to
trade. Google is also one of the largest sellers of ad space globally.39 Srinivasan notes that similar
conduct is prohibited in other places such as financial markets where “problems related to speed
and data can distort competition in electronic trading markets” and are accordingly monitored for
conflicts-of-interest, abuse of dominance, and asymmetrical information advantages. She writes
that “in markets for electronically traded equities, we require exchanges to provide traders with fair
access to data and speed, we identify and manage intermediary conflicts-of-interest, and we
require trading disclosures to help police the market.”

Online advertising markets that were historically more competitive have been undermined by
Google’s growing asymmetrical advantages and conflicts-of-interest which include:
● asymmetrical advantages (the use of high switching costs for advertizers seeking alternatives
due to supply chain ownership, inappropriate uses of private information on consumers not
available to competitors, eliminating third-party access to customer information, collusion
with Apple to ensure prime placement of Chrome on Apple devices)
● conflicts-of-interest (acting as a buyer, seller and market broker; prioritizing its own
companies along the value chain)
While these issues are a product of business decisions, their detection is obscured by algorithms.

Moreover, introducing sophisticated foundational AI to optimize ad targeting that only Google can
access while creating new lines of Google business along the ad tech value chains will create a
context in which few if any other organizations will be able to compete. Measures are required to
regulate such real-time bidding markets to address clear conflicts of interest and establish
transparency along the value chain so customers and intermediaries can make informed decisions.
Srinivasan notes that “Lawmakers, antitrust enforcers, and academics are concerned that these
factors distort growth and create high trading costs, which ultimately harm consumer welfare. These
and other emerging issues - such as the surge of AI-generated sham “books” that now routinely
appear on Amazon within days of book announcements - require attention. It may be worth
exploring if and how these issues can benefit from other policy tools such as “Know Your
Customer” or "Beneficial Ownership” to prevent scams and hold perpetrators accountable.

Other policy tools that intersect and parallel AI may include C-59’s focus on greenwashing which can
be connected to false claims about AI capabilities - or Online Harms which can be connected to
unauthorized impersonations or deceptive content. If the Bureau currently perceives that it does not
have a mandate to address issues such as Real-Time-Bidding to regulate companies outside its
borders, it should strongly consider what such a mandate might look like.

39
Srinivasan, Dina. Why Google Dominates Advertising Markets Competition Policy Should Lean on the
Principles of Financial Market Regulation. Stanford Technology Law Review. Fall 2020.
https://law.stanford.edu/wp-content/uploads/2020/12/Srinivasan-FINAL-Why-Google-Dominates-Advertising-Ma
rkets.pdf
 14

A long-standing failure to enforce existing laws such as privacy means that many policy issues - from
privacy to copyright to competition - are increasingly collapsing in on one another. Without
regulation, AI will almost certainly exacerbate existing issues. Finding innovative intersectionalities
across these policy frameworks may be an important step toward healthier AI markets.

The Deception Economy

AI applications do not live in a vacuum, but interact with online assets (e.g. accounts, groups, ads,
reviews, etc.), an increasing proportion of which are ‘fake’ (i.e. do not correspond to real people) and
AI-generated. These assets lay a monetizable market foundation on which deception can occur. In
this market, fake assets, chatbots, botnets, adversarial networks, and other AI tools can be
deceptively used to impact consumer decisions, deceive targets, influence political outcomes,
commit crimes and place users’ privacy and safety at risk.404142 GoodBot describes this subset of
assets and interactions as the Deception Economy.

For example, platforms sometimes employ fake assets and undisclosed chatbots to overstate and
misrepresent product’s value to customers (e.g. fake profiles and chatbot interactions4344 on dating
apps, fake reviews on Amazon), and can be considered materially false or misleading. Canada’s
recent Bill C-59, tackling misrepresentative “greenwashing” provides a possible model for considering
misrepresentative online assets. In this context, assets harm users who make misinformed choices
about how to spend their time and money.

Another example is where fake assets are used by politically-motivated groups to deceptively
project consensus on an agenda (e.g. COVID disinformation,45 foreign influence campaigns) which
create misrepresentative, harmful and unsustainable societal impacts. Another still is the use of
fake or deceptive ads to commit fraud46 by stealing money from unsuspecting consumers, while
depriving legitimate companies of customers who want to purchase their products.

Perversely, platforms benefit from the presence of fake assets in two ways: (1) advertizing revenues
via engagement with fake assets that offer no value to consumers and vendors, and (2) lower costs
and complications for trust and safety teams. Moreover, one platform getting away with these
practices creates an environment in which other companies have limited incentive to address
similar problems, harming honest competitors. This combination of practices has led to the

40
Foreign Interference Commission. https://foreigninterferencecommission.ca/
41
The UN pushes for adtech accountability to stop the spread of hate and misinformation. Check My Ads.
https://checkmyads.org/un-global-principles-information-integrity
42
Algorithms should not control what people see, UN chief says, launching Global Principles for Information
Integrity. United Nations. June 24, 2024.https://news.un.org/en/story/2024/06/1151376
43
Cole, Samantha. Great - Dating apps are getting more hellish thanks to AI. Vice. March 16, 2023.
https://www.vice.com/en/article/m7bjqp/great-dating-apps-are-getting-more-hellish-thanks-to-ai-chatbots
44
Shearing, Lois, Are we all matching with bots on dating apps now? Cosmopolitan. May 12, 2023.
https://www.cosmopolitan.com/uk/love-sex/relationships/a43863662/how-to-tell-if-a-profile-is-a-bot/
45
Murero, Monica. Coordinated inauthentic behavior: An innovative manipulation tactic to amplify COVID-19
anti-vaccine communication outreach via social media. National Library of Medicine. March 16, 2023
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10060790
46
Ibid.
 15

normalization of fake assets which in turn leads to normalization of harm which in turn leads to
the normalization of toxic markets. Left unaddressed, these problems will almost certainly be
further compounded by AI.

Competition and the AI Tech Stack

Applications like ChatGPT sit atop the AI “tech stack” which leverages foundation models trained on
massive datasets at enormous cost and which only work because of extraordinary amounts of
computing power provided by cloud infrastructure services.“47 The cloud layer has three dominant
players — Amazon Web Services, Google Cloud Platform and Microsoft Azure. Cloud infrastructure
requires semiconductors - the computer chips market - which NVIDIA largely dominates. TSMC
manufactures chips while ASML produces the machines needed for manufacturing.”48

“As you move down the AI tech stack — from apps, to models, to cloud, to chips — the marketplace
gets more and more concentrated,49 ending up as a pure monopoly at the bottom. The biggest tech
companies — Amazon, Microsoft and Google — are already extraordinarily powerful at multiple
layers up and down the stack, including through their own offerings or close partnerships for cloud,
models and applications”.50 This concentration of power creates clear risks to competition and
democratic values globally. Exploring how to enable responsible and competitive markets is critical.
The relationship between Big Tech, AI and the AI tech stack should all be considered in market
studies recommended above.

APPENDIX A: LAWSUITS & EMERGING ISSUES

This appendix contains a list of US cases and emerging issues that primarily fall into either antitrust
cases or copyright infringement cases. While most do not intersect with the themes of the White
Paper, they constitute a reminder that the failure to enforce and update other policy areas - notably
privacy, copyright and competition - has created the enabling environment for AI companies to
launch products and services that have led to market dominance that cross policy lines. These
companies now seek to extend dominance to other markets. While these efforts are currently
focused on foundational models and AI applications that live on top of those models, companies’
access to backend engagement could introduce emerging anti-competitive advantages that would
be impossible to replicate for other actors along the value chain.

47
Sitaraman, Ganeshl Foster, Natalie, How States Can Keep Big Tech from Dominating AI. Politico. March 13,
2024. https://www.politico.com/news/magazine/2024/03/13/states-big-tech-ai-00146338
48
Ibid
49
Robertson, Derek, Politico. Jan 18, 2024.
https://www.politico.com/newsletters/digital-future-daily/2024/01/18/the-looming-ai-monopolies-00136400
50
Ibid
 16

FTC v. Amazon (2023) - Antitrust

FTC Release - Complaint
“The Federal Trade Commission and 17 state attorneys general sued Amazon.com, Inc. alleging that
the online retail and technology company is a monopolist that uses a set of interlocking
anticompetitive and unfair strategies to illegally maintain its monopoly power. The FTC and its
state partners say Amazon’s actions allow it to stop rivals and sellers from lowering prices, degrade
quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing
against Amazon. The complaint alleges that Amazon violates the law not because it is big, but
because it engages in a course of exclusionary conduct that prevents current competitors from
growing and new competitors from emerging. By stifling competition on price, product selection,
quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and
sellers, Amazon ensures that no current or future rival can threaten its dominance. Amazon’s
far-reaching schemes impact hundreds of billions of dollars in retail sales every year, touch
hundreds of thousands of products sold by businesses big and small and affect over a hundred
million shoppers.”51

U.S. and Plaintiff States v. Google LLC (2023) - Antitrust

DOJ Release - Complaint
“The United States and eight state plaintiffs-Virginia, California, Colorado, Connecticut, New Jersey,
New York, Rhode Island, Tennessee-have filed this antitrust enforcement action to challenge
Google's alleged monopoly and anticompetitive practices in the digital advertising technology (“ad
tech”) industry. The Complaint alleges that Google has monopolized or attempted to monopolize
three core markets of the ad tech industry: (1) publisher ad servers, (2) ad exchanges, and (3)
advertiser ad networks. Specifically, the Complaint alleges that Google has eliminated or diminished
any threat to its dominance in the ad tech industry by (a) neutralizing and eliminating ad tech
competitors through acquisitions, and (b) using its market power and dominance in these three ad
tech markets to force publishers and advertisers to use its products exclusively while disrupting
their ability to use competing ad servers, ad exchanges, or ad-buying tools.”

US Newspapers v. OpenAI and Microsoft (2024) - Copyright Infringement, Unfair

Competition By Misappropriation
Complaint
"This lawsuit arises from Defendants purloining millions of the Publishers’ copyrighted articles
without permission and without payment to fuel the commercialization of their generative artificial
intelligence (“GenAI”) products, including ChatGPT and Copilot. Although OpenAI purported at one
time to be a non-profit organization, its recent $90 billion valuation underscores how that is no
longer the case. ChatGPT, along with Microsoft Copilot (formerly known as Bing Chat) has also added
hundreds of billions of dollars to Microsoft’s market value. Defendants have created those GenAI
products in violation of the law by using important journalism created by the Publishers’ newspapers
without any compensation." (pages 1-2) "This lawsuit is not a battle between new technology and old

51
FTC Sues Amazon for Illegally Maintaining Monopoly Power. Federal Trade Commission. Feb 26, 2023.
https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-sues-amazon-illegally-maintaining-monopoly-
power
 17

technology. It is not a battle between a thriving industry and an industry in transition. It is most
surely not a battle to resolve the phalanx of social, political, moral, and economic issues that GenAI
raises. This lawsuit is about how Microsoft and OpenAI are not entitled to use copyrighted
newspaper content to build their new trillion-dollar enterprises, without paying for that content.
As this lawsuit will demonstrate, Defendants must both obtain the Publishers’ consent to use their
content and pay fair value for such use." (page 7)

Authors Guild v. OpenAI (2024) - Copyright Class Action

Complaint - Authors Guild Release
“Plaintiffs, authors of a broad array of works of fiction, bring this action under the Copyright Act
seeking redress for Defendants’ flagrant and harmful infringements of Plaintiffs’ registered
copyrights in written works of fiction. Defendants copied Plaintiffs’ works wholesale, without
permission or consideration. Defendants then fed Plaintiffs’ copyrighted works into their “large
language models” or “LLMs,” algorithms designed to output human-seeming text responses to users’
prompts and queries. These algorithms are at the heart of Defendants’ massive commercial
enterprise. And at the heart of these algorithms is systematic theft on a mass scale. Plaintiffs seek to
represent a class of professional fiction writers whose works spring from their own minds and their
creative literary expression. These authors’ livelihoods derive from the works they create. But
OpenAI’s LLMs endanger fiction writers’ ability to make a living, in that the LLMs allow anyone to
generate—automatically and freely (or very cheaply)—texts that they would otherwise pay writers to
create. Moreover, Open AI’s LLMs can spit out derivative works: material that is based on, mimics,
summarizes, or paraphrases Plaintiffs’ works, and harms the market for them. Unfairly, and
perversely, without Plaintiffs’ copyrighted works on which to “train” LLMs, Defendants would have no
commercial product with which to damage—if not usurp—the market for these professional
authors’ works. OpenAI’s willful copying thus makes Plaintiffs’ works into engines of their own
destruction.”

Creators v. Google (April 2024) - Copyright Class Action

Complaint
A class action suit launched by visual artists claims that Alphabet used their work without
permission to train its AI image generator Imagen. The proposed class action alleges that Google is
liable for misusing "billions" of copyrighted images to teach Imagen how to respond to human text
prompts.

Creators v. Stability AI, Midjourney, DeviantArt (2023) - Copyright Class Action

Complaint
“The AI image products at issue in this complaint are all built around the same asset: human
intelligence and creative expression, in the form of billions of artworks copied from the internet. []
The profits from the misappropriation of these works can then flow directly into Defendants’
pockets. But the artists who provided the intelligence and creativity—including Plaintiffs—were not
asked for their consent. They were not given any credit. And they have not received one cent in
compensation. [] During training of the model, the training images in the dataset are directly copied
in full and then completely ingested by the model, meaning that protected expression from every
 18

training image enters the model. As it copies and ingests billions of training images, the model
progressively develops the ability to generate outputs that mimic the protected expression copied
from the dataset. The outputs of a model are derived entirely and exclusively from what it has
extracted from the dataset.” (page 1) “Defendants hold out their AI image products as being able to
create substantially similar substitutes for the very works they were trained on—either specific
training images, or images that imitate the trade dress of particular artists—including Plaintiffs.”
(page 2)

Dept of Justice v. LiveNation-Ticketmaster - Antitrust

DOJ Release - Complaint
“The complaint [...] alleges that Live Nation-Ticketmaster unlawfully exercises its monopoly power in
violation of Section 2 of the Sherman Act. As a result of its conduct, music fans [...] are deprived of
ticketing innovation and forced to use outdated technology while paying more for tickets than fans in
other countries. At the same time, Live Nation-Ticketmaster exercises its power over performers,
venues, and independent promoters in ways that harm competition. Live Nation-Ticketmaster also
imposes barriers to competition that limit the entry and expansion of its rivals. We allege that Live
Nation relies on unlawful, anticompetitive conduct to exercise its monopolistic control over the live
events industry in the United States at the cost of fans, artists, smaller promoters, and venue
operators,” said Attorney General Merrick B. Garland. “The result is that fans pay more in fees, artists
have fewer opportunities to play concerts, smaller promoters get squeezed out, and venues have
fewer real choices for ticketing services. It is time to break up Live Nation-Ticketmaster.”

Centre for Investigative Reporting v. OpenAI - Copyright

Complaint
"Defendants copied, used, abridged, and displayed CIR’s valuable content without CIR’s permission
or authorization, and without any compensation to CIR. Defendants’ products undermine and
damage CIR’s relationship with potential readers, consumers, and partners, and deprive CIR of
subscription, licensing, advertising, and affiliate revenue, as well as donations from
readers.""Protecting these unique voices is one of the fundamental purposes of copyright law. [...]
The Copyright Act empowers Congress to protect works of human creativity that persons have
worked hard to create, encouraging people to devote substantial effort and resources to all manner
of creative enterprises by providing confidence that creators’ works will be shielded from
unauthorized encroachment and that creators will be properly compensated."

AI Is Fueling Scam Book Production

Author’s Guild Report
“Growing access to AI is driving a new surge of low-quality sham “books” on Amazon. In the last few
weeks, we have seen hundreds of examples of how bad actors are using generative AI to produce
“books” that deceive customers and drive sales away from legitimate books. It appears that every
new anticipated high-profile book has one or more scam books up within a couple days of going
on sale. For its part, Amazon has been quick to take down scam books when it receives complaints,
but the fact that they are able to get through Amazon’s content filters in the first place suggests that
detecting AI-aided scams is presenting a challenge.”