In this note, we discuss how the Antitrust Division of the Department of Justice and the Federal Trade Commission (collectively, the Agencies) view the effect of algorithmic pricing and other advances in artificial intelligence (AI) on the likelihood of post-merger coordination in the recently issued draft Merger Guidelines (dMGs), specifically in Guideline 3.
The Agencies suggest that the use of algorithms and AI may increase the likelihood of post-merger coordinated effects by (1) enhancing market transparency and (2) enhancing the likelihood of strong or rapid responses by rivals to any deviation from a collusive agreement. We discuss the findings of recent economic literature which suggest that the use of algorithms and AI may decrease – rather than increase – the likelihood of coordination in a market. To promote sound antitrust enforcement, we would urge the Agencies to acknowledge these nuances when finalizing the dMGs.
We also discuss how algorithms affect market “symmetry,” another factor often considered by the Agencies and the Courts when assessing the likelihood of post-merger coordinated effects. While the dMGs do not explicitly reference algorithms as affecting market symmetry one way or another, we explore the effect of the use of algorithms on market symmetry and alignment of market participants’ incentives since this has been discussed in the economic literature and may inform how the Agencies and the Courts will view it going forward.
Read the comments here.