Working paper

The competitive relationship between cloud computing and generative AI

Merger control and antitrust laws can address some of the competition risks arising from the relationship between generative AI and cloud computing.

Publishing date
11 December 2023
circuit board

Cloud computing providers and generative artificial intelligence (GenAI) providers nurture a close, interdependent relationship: GenAI providers need cloud providers to train, run and deploy their GenAI solutions, while cloud providers see GenAI providers as a business driver to grow their market shares in cloud and related markets, such as productivity software or search engines. The cloud/GenAI relationship takes various forms, including exclusive and strategic partnerships, especially between large cloud providers and GenAI providers across all parts of the cloud market, including infrastructure, platforms and software.

Competition benefits and risks are likely to result from the relationships. Competition benefits arise from increased competition and innovation in the cloud and GenAI sectors. Risks relate to potential concentrations arising from the partnerships between cloud and GenAI providers, and from anticompetitive practices, including discrimination in the
supply of IT equipment by dominant IT providers, interoperability obstacles to switching, use of business-user data, self-preferencing of cloud services over third parties, tying and pure bundling.

Merger control and antitrust laws can address some of the competition risks, while laws, including the European Union’s Digital Markets Act and Data Act, can deal with competition issues in digital markets and the cloud sector. Nevertheless there are gaps. The European Commission should amend existing EU instruments, including by changing the definition of a concentration under merger control, and should specify interoperability requirements for cloud providers under the Data Act. The Commission should also closely monitor developments in and outside Europe through market investigations, including with international counterparts, and should intervene to tackle imminent competition risks using fast procedural tools, such as interim measures.

About the authors

  • Christophe Carugati

    Dr. Christophe Carugati was an affiliate fellow at Bruegel on digital and competition issues until December 2023.

    He holds a Doctor in Law and Economics on Big Data and Competition Law from Paris II University, a Master in Law Economics from the European Master in Law and Economics (EMLE, University of Bologna, Hamburg, and Vienna), a master in Business Law from Aix-Marseille University, and a double Bachelor in Law and Economics from Toulouse School of Economics (TSE). His academic research focuses on the adaption of competition law to the data-driven economy and the regulation of platforms.

    He teaches a competition law seminar at Lille University to master students. Before joining Bruegel, he was a senior policy analyst at the US technology think-tank The Center for Data Innovation, where he worked on digital issues. He also has some experience in practicing competition law in the context of internships in law firms in Paris.

Related content