FTC warns that algorithmic price manipulation may violate antitrust laws
The US Federal Trade Commission (FTC) has stated that price manipulation using algorithms ``may be illegal'' and provided guidelines on what types of algorithms are illegal to use.
Price fixing by algorithm is still price fixing | Federal Trade Commission
In the real estate rental market in the United States, the use of applications that collect data from clients such as ``actual rent,'' ``vacancy information,'' and ``renovation plans,'' and propose the best pricing strategy is becoming widespread. The FTC has now found illegal applications that use data from other clients to calculate pricing strategies.
For example, if you are renting out a house you own, it is natural to look up the rent for similar houses in the area on a rental search site and use that price as a reference. It is not illegal to use an algorithm to calculate the best price based on such public information.
On the other hand, the act of sharing rent data and ``best price'' data with other landlords is essentially the same as ``landlords getting together to discuss and decide on the market rent in the area.'' Just as it is illegal to carry out such collusive acts through a non-competitive third party, it is also illegal to share data through algorithms.
Even in cases where the final decision on rent remains with each landlord and the rent calculated by the algorithm is used only as a reference, or where the rent is cheaper than the rent calculated by the algorithm through price negotiation, the ``initial price'' The FTC states that the act of 'recommending or setting' may be deemed illegal.
In addition to the real estate industry, a company that used a specific algorithm to set listing prices on Amazon Marketplace was found guilty in 2016, and similar algorithms have been found to be problematic in numerous industries, including meat processing , hotels , and casinos . This led to the FTC working with the Department of Justice to submit a preliminary document (PDF file) that provides guidelines on ``what kind of algorithms are illegal.''
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