That's definitely part of it, but I suspect they realise what has come out of Pandora's box cannot be put back in. I guess you can't really appreciate how someone can misuse or abuse something until you see it first hand, there will always be things people do which defy your imagination.
The basis of theft. Proprietary software is always about exploiting the end user through theft of ownership. Open Source has already beat these asshats at AI. No one wants to run their stalkerware in a world where any open and offline option exists. This is extremely obvious.
And if some company or individual decides to ignore this "regulatory body" that these companies have just decided should be in charge of everything, what happens? Did any governments agree to this? Why do those particular companies get to decide who should be able to compete with them? Kind of convenient that the companies with the biggest lead in AI have declared that they get to decide what's "safe" for other companies to do while trying to catch up with them.