WASHINGTON — The age of algorithm-assisted price fixing has arrived and U.S. Sen. Mazie Hirono and her Senate colleagues are moving to put a quick end to it.
Hirono co-sponsored a pair of measures last week, one aimed at preventing companies from using algorithms to set high prices and another to prevent landlords in high-price neighborhoods from doing the same.
As the lawmakers noted, existing antitrust laws do not account for competing companies using algorithms to make pricing decisions.
Under current law, price collusion can only be proven by an explicit agreement to fix prices. When pricing decisions are delegated to a single algorithm, an explicit agreement does not exist, even though the use of the algorithm may have the same effect in fixing prices.
“Healthy, transparent competition is critical to making sure consumers and small businesses are treated fairly in the market, but algorithmic price fixing stifles competition and empowers big businesses to raise prices by hiding their collusion behind technology,” Hirono said. “This legislation will encourage transparent competition on price, prevent big business from manipulating the market, and drive down prices for consumers and small businesses.”
Specifically, 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 and would require companies that use algorithms to set prices to disclose that fact and give antitrust enforcers the ability to audit the pricing algorithm if there are concerns that it may be harming consumers.
It would also 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 measure was co-sponsored by Hirono and Sens. Amy Klobuchar, D-Minn.; Ron Wyden, D-Ore.; Dick Durbin, D-Ill.; Peter Welch, D-Vt.; and Richard Blumenthal, D-Conn.
Hirono also co-sponsored the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act to crack down on companies that help landlords increase rents in already high-priced markets using software and price-setting algorithms.
The bill’s sponsors cited ProPublica reporting on companies like RealPage and Yardi that promote “property management software” that effectively helps landlords coordinate prices and increase rental rates in the same market. Using the software, companies can collect real-time price and lease information and suggest rent increases, in some cases by as much as 12%.
“Landlords have been colluding by using pricing algorithms to keep rent artificially high, cheating families out of fair housing prices,” Hirono said. “This bill would regulate the use of these collusive pricing algorithms and ensure that families can access the housing they deserve on fair terms.”
The bill would make it illegal (under the Sherman Act) for rental property owners to contract for the services of a company that coordinates rental housing prices and supply information; prohibit the practice of coordinating price, supply and other rental housing information among two or more rental property owners; make it unlawful for two or more coordinators to merge if a merger creates an appreciable risk of materially lessening competition; and allow individual plaintiffs to invalidate any pre-dispute arbitration agreement or pre-dispute joint action waiver that would prevent them from bringing a suit under the act.
Joining Hirono in sponsoring the measure were Sens. Klobuchar; Welch; Wyden; Blumenthal; Bernie Sanders, I-Vt.; Laphonza Butler, D-Calif.; and Jeff Merkley, D-Ore.
Michael Tsai covers local and state politics for Spectrum News Hawaii. He can be reached at michael.tsai@charter.com.