It’s hilarious that you can write this and then act befuddled as to why they would therefore want laws as an external (and ideally impartial) coordination device.
Thinking this is a super unique scenario just reveals your ignorance of both 1) game theory and 2) actual industrial history. An industry asking for regulation to stop a race to the bottom is not atypical at all.
I didn't say, or even imply, that it is. Just that it is unusual, historically speaking, to see it being pushed for so strongly just a couple of years¹ into general public awareness. Either because previously things didn't move so quickly or, more likely, because the leading companies had more moat initially to keep other adopters moving slower.
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[1] talking about LLMs and related tech, image targetting models have been in the public awareness for a fair while longer but they are not the primary concern for most.