What policy interventions for a competitive AI sector?

To address the economic challenges outlined in Mario Draghi’s report on EU competitiveness, European businesses must become significantly more productive and innovative. Artificial intelligence (AI), as a general-purpose technology, can help achieve this —stimulating competition and dynamism across the EU economy. But this vision will require thriving competition in the AI sector – to ensure the availability of diverse, high-quality, and affordable AI systems for European businesses.

This CERRE report by Zach Meyers and Marc Bourreau examines how policy can support sustainable competition in the AI sector.

The report concludes that competition in the AI sector is currently strong, both in static terms—low barriers to entry and a wide range of active firms—and even more so from a dynamic perspective. Significant investment, experimentation, and innovation are occurring across the value chain, with considerable uncertainty about which models, technologies or firms will ultimately succeed. Though a few firms hold strong positions in parts of the AI value chain, emerging competitors are attracting substantial investment. The authors argue that regulators should allow these competitive pressures to evolve and should be cautious and targeted with any regulatory interventions.

The report observes that future risks to competition warrant careful monitoring, however. These include:

• Unilateral conduct, such as firms withholding access to data or chips in order to constrain competitors or the growth of the AI sector generally;
• Structural barriers, like difficulties in switching compute providers due to technical incompatibilities; and
• Regulatory burdens that may deter new entrants or constrain innovation.

The report assesses existing and proposed regulatory tools and makes recommendations for targeted, proportionate action to help address these risks – such as encouraging voluntary data sharing, industry-led data portability initiatives to help consumers switch between AI chatbots and cutting commercial barriers for AI firms to switch cloud computing providers. It suggests such action should be evidence-led and aim to preserve the current high levels of innovation and competitive pressure in the AI sector.

The report was presented and debated on 3 July 2025, during the CERRE public webinar “AI and the Future of Competition“.