February 5, 2024 - Washington, D.C. – U.S. Senator Ron Wyden last week introduced legislation that would prevent companies from using algorithms to collude to set higher prices.

“Collusion is collusion, whether you do it over the phone or using an algorithm,” Wyden said. “This legislation, along with my Preventing the Algorithmic Facilitation of Rental Housing Cartels Act, will send a strong message to corporations that they won’t get away with coordinating to ratchet up prices on consumers.”  

Price fixing and other forms of collusion are illegal under current antitrust laws. However, current antitrust laws may be insufficient when competing companies delegate their pricing decisions to an algorithm. Current law requires proof of an explicit agreement to fix prices before condemning the conduct. When pricing decisions of multiple competitors are delegated to a single algorithm, that agreement may not exist even though the use of the algorithm may have the same effect as a traditional agreement to fix prices. This type of conduct has already occurred in rental housing and could spread to other sectors with the proliferation of algorithmic pricing.

Earlier this week, Wyden introduced the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act, which would crack down on companies that inflate rents with price fixing algorithms.

The Preventing Algorithmic Collusion Act would close a loophole in current law by presuming a price-fixing “agreement” when direct competitors share competitively sensitive information through a pricing algorithm to raise prices. The bill would also increase transparency by requiring companies that use algorithms to set prices to disclose that fact, and give antitrust enforcers the ability to audit the pricing algorithm when there are concerns it may be harming consumers. Furthermore, it would ban companies from using competitively sensitive information from their direct competitors to inform or train a pricing algorithm, and direct the Federal Trade Commission to study pricing algorithms’ impact on competition.

The legislation was led by U.S. Senator Amy Klobuchar, D-Minn. Alongside Wyden, the bill was cosponsored by U.S. Senators Dick Durbin D-Ill., Peter Welch, D-Vt., Mazie Hirono, D-Hawaii, and Richard Blumenthal, D-Conn.

The Preventing Algorithmic Collusion Act is supported by the Open Markets Institute.
Source: Senator Ron Wyden