This paper examines how the adoption of artificial intelligence (AI), particularly generative and agentic systems, is reshaping competition in downstream markets.

It explores mechanisms through which AI may lower barriers to entry, substitute for labour, reduce minimum efficient scale, and support innovation and product differentiation. At the same time, it highlights emerging risks related to data access, model restrictiveness, and the downsides of AI use.

The paper analyses how AI affects market structure and may shape firm behaviour, finding that its competitive impact is highly context-dependent, shaped by sectoral exposure to AI use, firm size and capabilities, and access to enabling inputs. It concludes by discussing enforcement, advocacy, and regulatory tools that may help preserve contestability, and identifies areas for future research, including attribution of liability and the implications of agentic AI systems.

The analysis is intended to support competition authorities in navigating AI-related market developments.