AI, Algorithmic Pricing, and the Risk of an Antitrust Complaint

According to an article by Morgan Lewis attorneys, algorithmic pricing tools, particularly those generated by AI, have come under scrutiny by both plaintiff attorneys and regulators.

Multiple lawsuits have been filed in federal and state courts, alleging that certain providers and users of algorithmic pricing tools have violated antitrust laws.

In three of those cases—In Re Realpage, Inc., Rental Software Antitrust Litigation (No. II); Duffy v. Yardi Systems Inc et al; and Cornish-Adebiyi et al. v. Caesars Entertainment, Inc., et al—the DOJ and/or the Biden Federal Trade Commission has filed a Statement of Interest in support of the plaintiffs.

The statement alleges that competitors’ use of the same algorithmic pricing tool can constitute price-fixing in violation of the Sherman Act. 

There has also been widespread legislative activity in this area at the federal, state, and even local levels. The issue has presented itself in the form of rental revenue management software. At the federal level, Democratic senators have introduced a Preventing Algorithmic Collusion Act. 

Given developments in both courts and legislatures, the writers advise companies using or contemplating the use of algorithmic pricing tools to carefully monitor developments in this area and consider implementing a formal antitrust compliance program.

Companies are likely well aware that price-fixing and bid-rigging agreements are unlawful per se, but they should keep in mind that using an algorithm “to monitor or enforce such an agreement does not change that.”

The writers advise particular caution when working with vendors in this area, especially vendors who may be using confidential non-public information from multiple businesses and/or if the vendor works with other companies that could be deemed competitors. 

Among other recommendations, if an algorithm offers procompetitive benefits, document them and ensure that business personnel who may be involved with pricing algorithms are trained regarding possible risks.