Researchers from the Advancing Systems Analysis (ASA) program recently participated in a seminar inviting expert dialogue on the role of BRICS competition authorities in the fast-maturing era of artificial intelligence (AI) and whether authorities from BRICS and beyond can cooperate on a common vision for AI in the interest of societal welfare.

Once a collection of fragmented technologies with limited applications, AI has rapidly evolved into a crucial driver of innovation across diverse sectors, including the digital economy. However, the AI industry is at risk of becoming oligopolistic under existing Big Tech. Through investments and partnerships, Big Tech has already positioned their influence in the development of AI while avoiding conventional regulatory merger probes.

The recent partnership between Microsoft and OpenAI is a prime example. Such cases have focused attention on the pressing need for competition authorities to adapt and harmonize their approaches to regulating the digital economy.

On 12 September 2024, Elena Rovenskaya presented (virtually) at the BRICS Seminar on Artificial Intelligence Regulation hosted at the School of International and Public Affairs of Shanghai Jiao Tong University in Shanghai in collaboration with the BRICS Competition Law and Policy Center. The seminar invited presenters from various experts from BRICS nations involved in the development of AI regulations.

A working paper on this topic is published on the Research Square preprint server.

In her presentation, Rovenskaya discussed how integrated systems analysis can enable competition authorities to better evaluate the potential outcomes of strategic partnerships between entities in the digital economy that typically fly under the radar of merger criteria. Specifically, she introduced system dynamics modeling, including causal loop diagrams, which enable us to illustrate complex systems as a set of interacting components whereby the components and their relevant interactions are informed by literature, expert opinion, or stakeholder input.

The latest explorations of the ECOANTITRUST reveal the potential loss of strategic independence for AI service providers through various partnerships with Big Tech incumbents. In 2019, for example, Microsoft and OpenAI entered a partnership involving various investments and product integrations. Despite increasing concerns, several competition authorities have failed to realize probe into the partnership.

Rovenskaya presented analysis developed by the ECOANTITRUST team, informed by public discussions on the Microsoft-OpenAI partnership following their governance controversies of the latter in late 2023. The analysis indicates numerous pathways and feedback loops through which the reduction of the strategic autonomy of Open AI affects competition and innovation in the AI sector.

The presentation was well-received, with experts commenting that the need to integrate systems-led analysis into competition law is greater than ever before.

All major supermarkets and retailers that sell groceries, such as Kroger, Walmart and Costco, give large amounts of food to food banks and pantries. In 2022, retailers donated close to 2 billion pounds of food across the United States, which amounted to US$3.5 billion that year. The estimated value of donated food was a little less than $2 per pound in 2022.

Retailers donate products that are typically packaged, palatable and safe for consumption, yet unsuitable for sale due to quality concerns, such as minor blemishes. Since these items can go a long way to feeding hungry people, donations represent one of the best uses of leftover or surplus food.

Donations are also technically acts of charity, and the companies responsible for them get tax breaks. This means that donations boost profits by lowering costs. There’s a second effect of donations on a store’s bottom line: They improve the quality of food on the store’s shelves and increase revenue from food sales.

As a supply chain scholar who studies food banks, I worked with a team of economists to estimate the effects of retail food donations. We used sales data for five perishable food categories sold by two competing retail chains, with stores located in a large, Midwestern metropolitan area. We found that stores that remove items on the brink of expiration, donate them to food banks and fill up the emptied shelf space with fresher inventory get more revenue from sales and earn higher profits.

Retailers donate 30% of what food banks give their clients

U.S. food banks, which have been operating for more than 50 years, give away over 6 billion pounds of food annually.

They get about 30% of that food for free from supermarkets and big-box retailers that sell groceries. Prior to the start of the COVID-19 pandemic, retailers supplied more than twice as much food to food banks as the federal government did. The volume of food supplied by federal programs administered by the United States Department of Agriculture, such as the Emergency Food Assistance Program, has steadily increased since 2020, to now almost match the volume of food donated by retailers.

In 2022, for example, the network of more than 200 Feeding America member food banks procured about 2 billion pounds from retailers and almost 1.5 billion pounds from government programs.

The remaining 2.88 billion pounds of food were either purchased directly, provided by farmers, donated by food processing companies or donated by people and organizations in local communities.

Despite several federal programs that help low-income people get food and the nation’s robust network of food banks and food pantries, nearly 50 million Americans are experiencing food insecurity. That means they can’t get enough nutritious food to eat at least some of the time.

Retail donation routines are established but inconsistent

When food on a store’s shelves is on the verge of expiration, store managers have three options. They can donate or discard it, or sell it at a discount.

Stores that regularly donate food have established routines for when they set aside about-to-expire food to give away. However, these routines are often inconsistent.

Many stores donate only on a seasonal basis or just give away certain kinds of food. For example, they might donate only meat, baked goods or fruits and vegetables. In many cases, donations take a backseat to more immediate priorities, such as customer service.

Those realities can increase the likelihood that food will land at the dump instead of on somebody’s table.

Although millions of Americans struggle to find their next meal, close to 40% of food gets thrown out along the supply chain, as food moves between agricultural producers, factories, retailers and consumers. This is largely due to logistical challenges: It’s hard to transport and distribute highly perishable food.

Discounts on food can undercut sales

Stores often prefer to sell food on the brink of expiration at a discount rather than donate it or throw it out due to the money they recoup that way. This option, however, also keeps the discounted food on the shelf, where it takes up valuable space that could otherwise hold fresher inventory.

Shelf space dedicated to the sale and promotion of full-priced products competes with that for price-discounted food. Stocking perishable foods that are starting to look iffy—such as bananas with brown spots sold alongside unblemished yellow bananas—could harm a retailer’s image if shoppers start to question the store’s quality.

In other words, if consumers make judgments based on all the produce that’s on display, then it may be better for stores if they don’t sell sad-looking bananas and instead just give them away.

My research team calls this practice “preemptive removal.” Increasing the average quality level of food on display does more than improve a store’s appearance. We used panel data with over 20,000 observations, and we included 21 retail stores that compete in a similar market geography. The five fresh food categories were bakery, dairy, deli, meat and produce.

Stores that donated food, instead of discounting it, may have made better use of the limited room to display fresher inventory. My research team found that food donations can increase average food prices by up to 1%, which corresponds to a 33% increase in profit margins. Profit margins for supermarkets and other food retailers are quite low and typically hover below 3%.

That means even a small increment in food prices, even a 1% bump up, can translate into significantly higher profits for retailers. At the same time, increasing the volume of retail food donations would get more food to people who need it, limit hunger and reduce food insecurity.

This article is republished from The Conversation under a Creative Commons license. Read the original article.