Italy’s ChatGPT ban sets a worrying precedent for EU startups

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OpenAI’s ChatGPT, which took the world by the storm after its launch in November, is now facing a temporary ban in Italy over “unlawful” personal data collection and the lack of an age verification system for children.

The Italian data protection agency, known as Garante, was prompted to act by ChatGPT’s data breach on March 20, which, according to OpenAI, allowed a number of users to see other users’ information, such as their first and last name, email address, and the last four digits of their credit card number.

Garante accused the US-based AI company of having “no legal basis” that justifies “the massive collection and processing of personal data” it needs to “train the algorithms on which the platform relies.” It also added that the lack of an age verification mechanism exposes children to “inappropriate” responses.

As a result, on Friday, the Italian regulator opened an investigation into OpenAI and has temporarily blocked access to GhatGPT in the country.

In response, OpenAI’s CEO Sam Altam tweeted that GhatGPT has ceased its services in Italy, stating, however, that he didn’t think the company had violated any privacy laws.

We of course defer to the Italian government and have ceased offering ChatGPT in Italy (though we think we are following all privacy laws).

Italy is one of my favorite countries and I look forward to visiting again soon!

— Sam Altman (@sama) March 31, 2023

Open AI has 16 days to respond with appropriate safety measures, or it could risk either a fine of up to €20 million or 4% of its total worldwide annual turnover.

Rising concerns

ChatGPT’s stirring capabilities are breeding growing concerns over the exponential advancement of generative AI.

In late March, the European Consumer Organisation (BEUC) called for EU and national authorities to investigate OpenAI’s system.

“For all the benefits AI can bring to our society, we are currently not protected enough from the harm it can cause people,” Ursula Pachl, Deputy Director General of BEUC, said in a statement.

The organisation fears that until the union’s AI Act takes effect, consumers will be at risk of harm from a technology which is not sufficiently regulated, and for which they’re not prepared.

Across the Atlantic, an open letter signed by AI experts and industry executives called for AI labs to immediately pause for at least six months the training of systems more powerful than GPT-4, ChatGPT’s successor.

The signatories — including researchers at DeepMind, computer scientist Yoshua Bengio, and Elon Musk — highlighted the need for regulatory policies, stressing that “powerful AI systems should be developed only once we are confident that their effects will be positive and their risks will be manageable.”

Tech industry opposition

The Italian regulator’s move to suspend access to ChatGPT could lead to a loss of economic opportunities in the country, Daniele Servadei, founder of Bologna-based SaaS ecommerce startup Sellix, told TNW.

“It limits the development and growth of the AI and tech sectors, preventing local companies from harnessing the technology,” he said.

Servadei further noted that the ban could have” a chilling effect” on AI development in Italy and beyond, “as developers and investors may fear future bans or restrictions on their products, which could hinder innovation and investment in the sector.”

Simone Basso, Chief Product and Technology Officer at Milan-based travel scaleup WeRoad, also stressed the potential negative impact on local businesses.

“ChatGPT has enhanced productivity for teams at WeRoad and worldwide, but recent decisions in Italy — from banning research on synthetic meat to holding back 5G rollouts — have hindered the country’s technology, innovation, and productivity growth,” Basson told TNW.

Basson added that while consumers can circumvent Garante’s restrictions using a VPN, companies with solutions based on such technologies “face uncertainty” and will be forced to prioritise other markets.

Is Italy setting a precedent for Europe?

While ChatGPT was already unavailable in mainland China, Hong Kong, Iran, Russia, and parts of Africa, Italy is the first Western country to take action against the AI system.

Germany could soon follow Italy’s lead, Ulrich Kelber, the German data protection commissioner, told Handelsblatt.

Meanwhile, authorities in France and Ireland are in contact with the Italian regulator, Reuters reports.

“We are following up with the Italian regulator,” said a spokesperson for Ireland’s Data Protection Commissioner. “We will coordinate with all EU data protection authorities in relation to this matter.”

The regulators’ concerns about ChatGPT — along with its popularity, as the fastest-growing consumer app in history — singal the need for co-ordinated and transparent EU policies that regulate the use and development of large language models.

It’s still unclear how ChatGPT and similar models will be impacted by the EU’s impending AI Act, which aims to strike a tricky balance between safety and innovation.