Antitrust agencies in the United States are growing increasingly concerned about the potential for Artificial Intelligence (AI) and mass data analysis techniques to facilitate collusive behavior and price-fixing amongst businesses. The Department of Justice (DoJ) and the Federal Trade Commission (FTC) recently made clear their positions in respective filings of a statement of interest in a private antitrust class action case.
The filings were driven by the agencies’ belief that using pricing algorithms among competitors can lead to violations of Section 1 of the Sherman Act. This action follows a previous decision by these agencies to withdraw ‘safety zones’ that previously protected competitors exchanging competitively sensitive information under certain circumstances.
Companies are now being urged to proactively assess the antitrust risks of using algorithms for crucial business decisions. This comes with multiple instances of such concerns, including those involving property management software providing rental pricing recommendations based on competitively sensitive data from landlords using the software.
Moreover, the DoJ and FTC have issued statements of interest in the past that highlight these risks. One such case, McKenna Duffy v. Yardi Systems, saw the agencies arguing against delegating key aspects of pricing to a common algorithm.
While there have been numerous suggestions on how to handle this antitrust risk, it boils down to three main points. Firstly, companies must fully comprehend the workings and potential implications of these AI tools. Secondly, the procompetitive benefits of such tools should be thoroughly and preemptively documented. Finally, companies should consider indemnification options, either from the AI provider or through their own insurance.
Despite the increasing scrutiny on AI and pricing software, the consensus remains that these tools can promote competitive behaviors, provided companies take necessary precautions against potential antitrust risks.
The original article by Jeetander T. Dulani and J. Nicci Warr, partners at Stinson, can be found in its entirety here.