| Using an algorithm is not what makes it criminal, facilitating large-scale collusion is what makes it criminal. Here is the FTC and DoJ's explanation of algorithmic price-fixing: https://www.ftc.gov/system/files/ftc_gov/pdf/YardiSOI-filed%... Some quotes: > concerted action can take many forms—including, inter alia, competitors’ jointly delegating key aspects of their decisionmaking to a common algorithm, because doing so “joins together separate decisionmakers” and thus “deprives the marketplace of independent centers of decisionmaking.” > As technology has developed in the 133 years since the Sherman Act created a federal prohibition on price fixing, firms have evolved the mechanisms they use for reaching unlawful price-fixing agreements. In-person handshakes gave way to phone and fax, and later to email. Algorithms are the new frontier. And, given the amount of information an algorithm can access and digest, this new frontier poses an even greater anticompetitive threat than the last. > The question in this case is whether the defendants have violated Section 1 of the Sherman Act by allegedly knowingly combining their sensitive, nonpublic pricing and supply information in an algorithm that they rely upon in making pricing decisions, with the knowledge and expectation that other competitors will do the same. Although not every use of an algorithm to set price qualifies as a per se violation of Section 1, taking the allegations set forth in the complaints as true, the alleged scheme meets the legal criteria for per se unlawful price fixing. (emphasis mine) > To begin, the complaints allege that RealPage’s proposal “contemplated” and “invited” concerted action among the landlords. In fact, its “intent to create coordination among users,” including its “aim” of “increasing revenues by raising rents,” was “transparent to all.” Among other things, RealPage required each user to submit real-time pricing and supply data to it, and RealPage’s marketing materials allegedly “touted” its use of “non-public data from other RealPage clients,” enabling them to “raise rents in concert”; as well as the algorithms’ ability to “facilitate collaboration among operations” and “track your competition’s rent with precision.” > Indeed, the complaints also contain ample allegations on how RealPage directly constrained the “deviations” from its suggested prices, including by enforcing and monitoring compliance with those prices, so the landlords effectively delegated aspects of their pricing decisions to RealPage. > Indeed, RealPage allegedly touted this feature—stating in a press release that it gives clients “the ability to ‘outsource daily pricing and ongoing revenue oversight,’” such that RealPage could “set prices”
as though it “own[ed]” the clients’ properties “ourselves.’” You can think of RealPage's role as a facilitator that gathers competitors together and says "let me set all of your prices, if enough of you agree then you won't need to compete and we'll all make a lot of money together." That is illegal under antitrust law. |
> Let’s just change the terms of the hypothetical slightly to understand why. Everywhere the word “algorithm” appears, please just insert the words “a guy named Bob”. Is it ok for a guy named Bob to collect confidential price strategy information from all the participants in a market, and then tell everybody how they should price? If it isn’t ok for a guy named Bob to do it, then it probably isn’t ok for an algorithm to do it either.
Full talk from 2017: https://www.ftc.gov/system/files/documents/public_statements...