In response to the continuous innovation and increasingly widespread applications of Generative Artificial Intelligence (the “Generative AI”), the Fair Trade Commission (the “FTC”) issued the “Public Consultation Paper for Generative Artificial Intelligence and Competition” (the “Paper”) on July 18, 2025. The purpose of this Paper is to better understand the current state of the AI-related industrial supply chain and competitive dynamics in Taiwan, and to assess the potential impact of Generative AI on competition in the domestic market.

This Paper represents the FTC’s preliminary assessment and exploration of potential competition issues arising from the Generative AI industry. It provides an overview of the market structure and fundamental characteristics of the Generative AI, and outlines the development status of Taiwan’s AI hardware supply chain, model development, and application deployment. Additionally, the potential competition issues arising from the development of Generative AI are outlined and examined as follows:

1. Unilaterally Abusing Market Dominance: For example, the cloud services market that provides AI computing resources is currently dominated by a limited number of technology companies. If these firms, which control substantial computing resources, restrict access for new entrants or prioritize the allocation of such resources to their affiliated or partner AI model developers, such conduct may result in significant barriers to entry for competing AI model developers in the market.
2. Concerted Action: For example, AI may assist in monitoring the conduct of parties to a collusive agreement by identifying members who violate the terms of the agreement. In addition, when multiple undertakings utilize the same Generative AI model, they may engage in same business decision-making, which could distort or reduce competition in the market.
3. Market Concentration: Large AI companies may seek to increase their market share or consolidate critical resources through horizontal mergers. Vertical integration may enhance their market power in upstream or downstream markets. In cases of conglomerate mergers, companies may engage in tying or bundling strategies involving products or services.
4. False Advertising, and Other Unfair Competition Practices: The use of Generative AI to create content may significantly impair consumers’ ability to distinguish between authentic and misleading information, thereby facilitating the use of deceptive marketing practices by businesses. In addition, AI-powered data analysis may enable firms to deliver false, misleading, or deceptive information or content tailored to individual users, further exacerbating the risks of consumer harm and unfair market practices.

To receive opinions from different sectors and ensure the contents are as comprehensive as possible, the FTC has published the Paper on the FTC website and calls for contributions. The relevant guidelines or white papers to be issued by the FTC in the future will serve as important reference materials for addressing competition law issues related to generative artificial intelligence in Taiwan.