Manatt Antitrust and Competition Partner Dylan Carson was quoted in a Bloomberg Law article discussing the Department of Justice’s recent statement that the use of price-setting algorithms among competitors is against the law.
In an amicus brief filed in a Ninth Circuit case appealing denied claims that Vegas hotel companies used algorithms to fix room prices, the DOJ said that using the algorithms is unlawful even if the generated prices aren’t final, echoing a previous statement the agency made in a separate case. In both, the trial courts ruled that the plaintiffs, whom the DOJ filed in support of, failed to show collusion because the hotels used the price-setting software at different times and weren’t required to adhere to its recommendation. However, Carson said the agency contends it could still be an illegal agreement despite the eventual final price.
“[If competitors are] agreeing where to start, and the computer software spits out the optimal price for you to consider, and you as a competitor decide to use a different price than that, is that still sufficient to be a horizontal price-fixing agreement?” Carson said. “That’s a key question in the appeal.”
Also at issue are the marketing materials provided by the algorithm creators, which the DOJ argued invite collusion by telling users that their competitors have received the same pitch, therefore helping stave off competition.
“The marketing is ‘use this because your competitors will too and you’ll all be charging the same profit-maximizing prices, so don’t worry, you won’t be undercut, you won’t be hamstrung by using our software to set your pricing,’” Carson said.
Bloomberg Law subscribers can read the full article here.