Enforcers say more evidence needed on algorithms

Janith Aranze

07 June 2017

Enforcers say more evidence needed on algorithms

Etienne Pfister (left) and Matthew Bennett (right)

Etienne Pfister, chief economist at France’s Competition Authority, said more empirical evidence is needed to determine whether and how the use of online pricing algorithms could potentially violate competition law, and warned regulation and oversight of such pricing programs will be costly. Janith Aranze at GCR Live 6th Annual Telecoms, Media & Technology in Brussels

Speaking on a panel today, Pfister said algorithms in theory could pose specific competition concerns, but he stressed that a model capable of proving that pricing algorithms are stifling competition has yet to be developed.

Pfister said as companies differ in price and offerings, even if rival companies used the same online pricing algorithms, it would not necessarily result in collusive behaviour or lockstep pricing. If algorithms did lead to uniform pricing, consumers will often choose the company that spends the most on advertising, forcing its rivals to lure customers by lowering their prices regardless of what the algorithm might suggest, Pfister said.

He also said personalised pricing could also increase deviation from algorithm-based pricing. “If I see someone who has a low willingness to pay, I’m going to propose them a low price. Other companies may not have access to the same data so will interpret this as cheating,” he said.  

Speaking on the same panel, UK Competition and Markets Authority Senior Legal Director Claudia Berg said pricing algorithms are a cornerstone of modern business and agreed with other panellists that they may not represent a new problem in the antitrust world.

She said the CMA is currently undertaking research to gain a deeper understanding of the issues, and that the watchdog wants to ensure it does not stifle innovation if and when it brings a case against potentially harmful, algorithm-based pricing.

Pfister and Berg were joined by Matthew Bennett, Vice President of Charles Rivers Associates and Nicolas Petit, Professor of Law, University of Liege and University of South Australia. The panel was moderated by Laurent Garzaniti at Freshfields Bruckhaus Deringer.

GCR Live’s Telecommunications, Media and Technology conference concludes today. 

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