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Potential Antitrust Risks When Using AI-Driven Software Pricing Tools
Artificial intelligence is everywhere and in every business. In numerous industries, these tools can offer significant benefits to companies. For example, in the hospitality industry, these tools can optimize prices and improve vacancy rates. Even better, these helpful tools come with no legal risk, right? Not necessarily.
In fact, though a complicated and uncertain area, multiple federal courts have permitted price-fixing claims to proceed based on competitors' common usage of the same algorithmic software tool, and the U.S. Department of Justice has taken the position that coordination of competition through an algorithm is no less illegal than direct collusion. As a result, companies need to seriously consider the potential antitrust risks when using AI-driven or algorithmic software-based third-party services for things such as pricing or inventory management. These tools can increase efficiency, but, depending on specifics, can also lead to serious antitrust risks.
Why Is It Risky?
As an initial matter, all businesses should know that competitors cannot lawfully coordinate to set their prices. In the traditional sense, that would mean competitors directly communicating and reaching an agreement about their prices or output. However, antitrust law applies equally to indirect agreements reached through a common agent — or hub. For example, multiple competitors agreeing to coordinate their pricing through use of the same agent would be legally no different than such competitors reaching that same agreement directly. In antitrust parlance, this is known as a "hub and spoke" conspiracy because the direct agreements are between each competitor (or spoke) and the common "hub," but each such "spoke" proceeds at least in part because it understands that its competitors are entering parallel agreements with the "hub" that will facilitate the desired coordination.
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