Pricing Algorithms: Conscious Parallelism or Conscious Commitment?

July 2017

NORTH AMERICA COLUMN BANNER

Pricing Algorithms: Conscious Parallelism or Conscious Commitment? By Alex Okuliar and Elena Kamenir*

Edited by Koren W. Wong-Ervin and Rob Kwinter

Background

Headline after headline has proclaimed the demise of bricks-and-mortar retail and the rise of the online merchant. Recent studies show that 8 out of 10 Americans now shop online, with almost half of US adults shopping online either weekly or a few times a month.[1] The online retail environment, in addition to reshaping the physical retail landscape, also may be fundamentally changing merchant pricing behavior.  Using algorithms, competitors can now identify and “scrape” pricing information and pricing deviations. In particular, pricing algorithms—which are set by computers—can be programmed to react to certain programmed parameters (e.g., competitor pricing) in setting a price. The question for antitrust enforcers has become whether these programs can cross the line from benign conscious parallelism to something more.

The global enforcement community recently has taken notice of pricing algorithms and begun the debate over their antitrust implications. A background note by the OECD Secretariat, for example, states that “the increasing reliance of big online companies on secret algorithms poses a concern that the organization of the world’s information is, to some extent, controlled by automated systems in the hands of a few market players.”[2] One of the main concerns discussed in connec…

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