The question of algorithms and competition has become a subject of discussion of growing interest among academics, practitioners and antitrust enforcers in the past years.
Algorithms are commonly used by companies. They present a number of benefits, such as the possibility to process quickly large amounts of data and allow quicker adaptation to market conditions. The EU Competition Commissioner Margrethe Vestager has also stated: “[…] I don’t think competition enforcers need to be suspicious of everyone who uses an automated system for pricing.”
However, algorithms also raise a number of questions in relation to competition law. In particular, some of the concerns raised relate to the potential use of algorithms in order to implement collusive practices or make them more effective, the responsibility for collusion involving algorithms, and the adequacy of the current antitrust enforcers’ toolbox to apprehend the possible anti-competitive scenarios involving algorithms.
In this respect, a note from June 2017 from the EU on algorithms and collusion, prepared for the Organization for Economic Cooperation and Development, explored the different potential issues from a competition law perspective of the use of algorithms. It discussed, in particular, the implications in both a vertical and horizontal context. These included the use of algorithms to monitor prices that competitors have previously agreed, the implementation of explicit collusion by means of algorithms and use of algorithms in order to engage in explicit or tacit collusion. There is also a concern that the use of price monitoring software may enable manufacturers to use pressure against retailers who do not respect the manufacturer’s recommended prices, thus engaging in illegal resale price maintenance. In addition, automatic price monitoring and adjustment practices were noted as a growing phenomenon in a number of industries during the sector inquiry into e-commerce conducted by the European Commission between May 2015 and May 2017.
In this context, it appears that some competition authorities have themselves started using algorithms as a detection tool for collusive behavior.
Given the relative novelty of these issues and the challenges raised by algorithm-based conduct, the Commission and other competition authorities can be expected to continue exploring different enforcement tools in this regard and increase scrutiny on the use of algorithms by companies.