AI in Action: Price Fixing Play
March 18, 2024
This essay is the work of a dumb dinobaby. No smart software required.
If a tree falls in a forest and no one is there to hear it, does I make a sound? The obvious answer is yes, but the philosophers point out how can that be possible if there wasn’t anyone there to witness the event. The same argument can be made that price fixing isn’t illegal if it’s done by an AI algorithm. Smart people know it is a straw man’s fallacy and so does the Federal Trade Commission: “Price Fixing By Algorithm Is Still Price Fixing.”
The FTC and the Department of Justice agree that if an action is illegal for a human then it is illegal for an algorithm too. The official nomenclature is antitrust compliance. Both departments want to protect consumers against algorithmic collision, particularly in the housing market. They failed a joint legal brief that stresses the importance of a fair, competitive market. The brief stated that algorithms can’t be used to evade illegal price fixing agreements and it is still unlawful to share price fixing information even if the conspirators retain pricing discretion or cheat on the agreement.
Protecting consumers from unfair pricing practices is extremely important as inflation has soared. Rent has increased by 20% since 2020, especially for lower-income people. Nearly half of renters also pay more than 30% of their income in rent and utilities. The Department of Justice and the FTC also hold other industries accountable for using algorithms illegally:
“The housing industry isn’t alone in using potentially illegal collusive algorithms. The Department of Justice has previously secured a guilty plea related to the use of pricing algorithms to fix prices in online resales, and has an ongoing case against sharing of price-related and other sensitive information among meat processing competitors. Other private cases have been recently brought against hotels(link is external) and casinos(link is external).”
Hopefully the FTC and the Department of Justice retain their power to protect consumers. Inflation will continue to rise and consumers continue to suffer.
Whitney Grace, March 18, 2024
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