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How pricing algorithms pose significant antitrust risk for consumers

Bill Baer's testimony before the U.S. Senate Committee on the Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights

A general view of the U.S. Capitol Building at dawn, in Washington, D.C., on Wednesday, November 2, 2022. (Graeme Sloan/Sipa USA)No Use Germany.
A general view of the U.S. Capitol Building at dawn, in Washington, D.C., on Wednesday, November 2, 2022. (Graeme Sloan/Sipa USA)No Use Germany.
Editor's note:

The following testimony was given on December 13, 2023 to U.S. Senate Committee on the Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights. Watch the full video here.

Chair Klobuchar, Ranking Member Lee, and distinguished members of the Subcommittee, thank you for the opportunity to appear this afternoon and address one of the many challenges we face in harnessing the power and maximizing the potential of artificial intelligence.

The growing use of pricing algorithms presents one such challenge. I am no expert in AI. But from the vantage point of this long-time antitrust enforcer, now just an antitrust worrier, there is good reason for concern that misuse of this tool is growing and puts consumers at risk of paying supracompetitive prices for all sorts of goods and services.

As your October hearing on the rental housing market explored, the potential misuse of pricing algorithms comes in many different forms. My testimony focuses on three collusive uses of AI pricing to harm competition and consumers: (1) head-to-head agreements between competitors to use the same pricing tools to fix prices; (2) hub and spoke agreements where competing firms use the same third party’s pricing algorithm to achieve anticompetitive outcomes; and (3) situations where widespread use of pricing algorithms by competitors may facilitate tacit collusion and cause significant consumer harms.

Download the full testimony

  • Footnotes
    1. Zach Brown and Alexander MacKay summarize the concerns and evidence associated with this risk: Zach Brown and Alexander MacKay, “Are online prices higher because of pricing algorithms?” Brookings, July 7, 2022 https://www.brookings.edu/articles/are-online-prices-higher-because-of-pricing-algorithms/’; former FTC Acting Chair Maureen Olhausen also spoke thoughtfully on these issues back in in 2017: Maureen K. Olhausen, “Should We Fear The Things That Go Beep In the Night? Some Initial Thoughts on the Intersection of Antitrust Law and Algorithmic Pricing,” US Federal Trade Commission, May 23, 2017 https://www.ftc.gov/system/files/documents/public_statements/1220893/ohlhausen_-_concurrences_5-23-17.pdf.