WASHINGTON - U.S. Senator Amy Klobuchar (D-MN), Chairwoman of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, along with Senators Ron Wyden (D-OR), Dick Durbin (D-IL), Peter Welch (D-VT), Mazie Hirono (D-HI), and Richard Blumenthal (D-CT), introduced the Preventing Algorithmic Collusion Act to prevent companies from using algorithms to collude to set higher prices.
“Price fixing is illegal under our antitrust laws, but the development of automated price-setting algorithms can create loopholes in current law that could be used to unfairly raise prices on everything from rent to rideshares,” said Klobuchar. “My bill will strengthen antitrust law and guarantee needed transparency to prevent companies from using algorithms to fix prices to ensure consumers are able to get the full benefits of competition.”
“Collusion is collusion, whether you do it over the phone or using an algorithm. This legislation, along with my Preventing the Algorithmic Facilitation of Rental Housing Cartels Act, will send a strong message to corporations that they won’t get away with coordinating to ratchet up prices on consumers,” said Wyden.
“Businesses are increasingly turning to algorithms to determine pricing for their products. In a technology-based world, we need to prevent businesses from using these tools to reduce competition,” said Durbin. “That’s why I’m joining my colleagues in introducing the Preventing Algorithmic Collusion Act, which would ensure that pricing algorithms aren’t being used to take advantage of consumers and inflate prices.”
“Transparency is a key tenet of doing good business, and consumers expect businesses to treat them fairly. But increasingly we've seen competitors throw antitrust laws to the wind by using pricing algorithms to avoid competition, leaving consumers to suffer the consequences. The Preventing Algorithmic Collusion Act works to close existing loopholes and increase transparency around how companies use pricing algorithms to make sure consumers aren’t getting a raw deal,” said Welch.
“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 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.”
“Predatory algorithms significantly suppress competition in today's markets and allow companies to collude to raise prices to unaffordable levels. The Preventing Algorithmic Collusion Act will eliminate coercive anticompetitive software and empower consumers,” said Blumenthal.
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. This type of conduct has already occurred in rental housing, and we must ensure that it does not spread to other sectors of our economy with the proliferation of algorithmic pricing.
To strengthen current price fixing law, Klobuchar’s 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.
Klobuchar is a leader in the Senate in pushing to ensure our competition laws are as sophisticated as the technologies used in today’s modern economy.
As Chair of the Competition Policy, Antitrust and Consumer Rights subcommittee, Klobuchar held two hearings in late 2023 exploring how algorithms can be used to harm consumers, including Examining Competition and Consumer Rights in Housing Markets and The New Invisible Hand? The Impact of Algorithms on Competition and Consumer Rights. Both hearings highlighted the potential for laundering nonpublic competitor data in a pricing algorithm to raise prices and included calls for the reforms in this bill.
This month, Klobuchar joined Senator Wyden in introducing the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act to ensure that large landlords cannot skirt antitrust law and collude to increase rent prices across the country.
In November 2022, Klobuchar, along with Senators Durbin and Booker, urged the U.S. Department of Justice (DOJ) to investigate potential anticompetitive conduct affecting apartment rent rates, voicing their concern that RealPage’s pricing algorithms could artificially inflate rental rates and facilitate collusion.
Klobuchar leads the American Innovation and Choice Online Act with Senator Chuck Grassley (R-IA). This bipartisan legislation to restore online competition by preventing technology companies from abusing their market power to harm competition, online businesses, and consumers. Last year, the American Innovation and Choice Online Act made history as the first digital competition bill to advance in Congress since the dawn of the internet when it passed the Senate Judiciary Committee with a 16-6 vote.
In February 2021, Klobuchar introduced the Competition and Antitrust Law Enforcement Reform Act to give federal antitrust enforcers the resources they need to do their jobs, strengthen prohibitions on anticompetitive conduct and mergers, and make additional reforms to improve enforcement.