Artificial intelligence, is rapidly reshaping industries across the globe. With its growing influence, many jurisdictions are faced with the question of how best to regulate this transformative technology. Can we afford to wait until issues arise, or is it time to implement regulatory safeguards that prevent potential harm before it materializes? The concept of ex ante regulation—regulation that is put in place proactively rather than reactively—offers a compelling solution. The regulation of digital markets is a prime example, from which many lessons can already be learnt, and it becomes increasingly clear that a similar approach may be necessary to address the unique challenges posed by AI.
The European Union has taken strides in this direction with its Digital Markets Act (DMA), which is aimed at curbing anti-competitive behavior among large online platforms. The reasoning seems rather straightforward: rather than waiting for these platforms to dominate markets and stifle competition, the DMA imposes upfront obligations to ensure fair competition from the outset. But could this approach be effectively translated into AI markets?
AI presents a set of challenges that may make ex ante regulation not only beneficial, but also necessary. For one, AI technologies often operate in a “black box” fashion, with decision-making processes that are opaque even to their creators. This lack of transparency makes it difficult for traditional regulatory mechanisms to catch up once AI systems are entrenched in critical markets. Preemptive rules designed to promote transparency and fairness from the start could go a long way in ensuring that AI innovations develop in ways that benefit both consumers and competition.
An ex ante regulatory framework could mitigate these risks by imposing limits on how companies leverage AI to entrench their market dominance.
Moreover, AI-driven markets tend to exhibit strong network effects. Early adopters can quickly dominate the market, creating barriers for smaller competitors. Without timely intervention, these effects could arguably lead to monopolistic behavior that limits innovation and consumer choice. An ex ante regulatory framework could mitigate these risks by imposing limits on how companies leverage AI to entrench their market dominance.
Critics of ex ante regulation, on the other hand, argue that it stifles innovation by imposing burdensome rules before businesses have even had the chance to develop fully. However, we must ask: is it better to wait for monopolistic practices to solidify and address the consequences later? Experience with digital markets suggests that, by the time regulators step in with ex post solutions, the damage is often done, and smaller competitors are already sidelined. Proactive regulation does not necessarily mean halting innovation—it can create a more level playing field that fosters long-term growth and diversity in the market.
While AI is undoubtedly a driver of innovation, it also brings risks that traditional reactive regulatory approaches may not be equipped to handle. Ex ante regulation, which has proven effective in digital markets, may provide a blueprint for how we can safeguard competition and consumer interests as AI continues to evolve. As the regulatory landscape develops, the question remains: will we act now to shape the future of AI markets, or will we wait until it’s too late?
