Terms of use: What types of competition do model providers ban?
by SteveVeilStream | 2026-02-24 22:43:37+00:00
I thought it would be interesting to look at the terms of service of the frontier labs and there was more deviation than I expected when it comes to the issue of building competing offerings. Note that I am not a lawyer and none of this is legal advice. You should refer to the specific versions of the agreements that apply to you and consult with a lawyer.

It is very common for technology companies (particularly when providing data through an API,) to include a term that more-or-less says their customers can't build a product that will compete with them. These terms can become quite contentious and may be the subject of detailed negotiations on a customer by customer basis. An example is in the finance industry where a number of companies provide products to end users but also licsense data to other companies that also make products for end users.

Looking at the four big labs, I prefer the terms from OpenAI and Google (Gemini). Unless I am missing something, they are both relatively narrow in how they limit your use. As long as you aren't trying to use their model to build a competitive model, the term doesn't look that threatening.

OpenAI:
Consumer: you may not "Use Output to develop models that compete with OpenAI."
Business: will not "except for a Permitted Exception, use Output to develop artificial intelligence models that compete with OpenAI’s products and services;..."

Gemini:
"You may not use the Services to develop models that compete with the Services (e.g., Gemini API or Google AI Studio)."

xAI:
xAI is more problematic since it is more broad in what it covers. That said, it's probably not of a major immediate concern to most customers since the xAI product/service offering is quite narrow today. That may change meaningfully when Macrohard launches if the rumours are true.
Consumer: Prohibited uses... "Using the Service or any Output to develop models or services that compete with xAI,..."
Enterprise: shall not... "use any Service to help develop, or help provide to any third party, any product or service similar to or competitive with any Service;..."

Anthropic:
From my perspective, the Anthropic terms are the most challenging:
Consumer: may not use... "To develop any products or services that compete with our Services,..."
Enterprise: "Customer may not and must not attempt to (a) access the Services to build a competing product or service,..."

The challenge is that the Anthropic term is not limited to "models" like OpenAI and Gemini and your chances of overlapping with Anthropic may be higher depending on how exactly the definition of "competing product service" is interepreted.

If a software company uses Claude Code to build a legaltech startup, are they now in violation of this term after Anthropic announced the legal plugin for Claude Cowork? What about all of wealthtech companies using Claude (Claude Code, Claude Co-work, the models API) after the announcemen today that Claude is launching wealth management plugins? Perhaps the concern is a bit of a stretch but it feels messier than it should be.

At some point, I beleive the frontier labs need to decide if it is more important to win in the infrastructure layer or the application layer. They can play in both layers but the terms need to reflect their primary objective. That, or they need to be open to negotiationg and signing custom terms with smaller companies that are taking a long term view.