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Hirono, Colleagues Introduce Antitrust Legislation to Prevent Algorithmic Price Fixing

WASHINGTON, DC – U.S. Senator Mazie K. Hirono (D-HI) joined Senator Amy Klobuchar (D-MN) and four colleagues in introducing the Preventing Algorithmic Collusion Act to prevent companies from using algorithms to collude to set higher 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,” said Senator Hirono. “This legislation will encourage transparent competition on price, prevent big business from manipulating the market, and drive down prices for consumers and small businesses.”

Price fixing and other forms of collusion are illegal under current antitrust laws. However, current antitrust laws may be insufficient when competing companies delegate their pricing decisions to an algorithm. Current law requires proof of an explicit agreement to fix prices before condemning the conduct. When pricing decisions of multiple competitors are delegated to a single algorithm, that agreement may not exist even though the use of the algorithm may have the same effect as a traditional agreement to fix prices.

To strengthen current price fixing law, this legislation will:

  • 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;
  • Increase transparency by requiring companies that use algorithms to set prices to disclose that fact and give antitrust enforcers the ability to audit the pricing algorithm when there are concerns it may be harming consumers;
  • Ban companies from using competitively sensitive information from their direct competitors to inform or train a pricing algorithm;
  • Direct the Federal Trade Commission (FTC) to study pricing algorithms’ impact on competition. 

The Preventing Algorithmic Collusion Act is endorsed by the Open Markets Institute and American Economic Liberties Project.

In addition to Senators Hirono and Klobuchar, the legislation is cosponsored by Senators Ron Wyden (D-OR), Dick Durbin (D-IL), Peter Welch (D-VT), and Richard Blumenthal (D-CT).

The full text of the legislation is available here.