Algorithmic Tacit Collusion: A Regulatory Approach

In light of the ongoing debate on algorithmic collusion, this paper intends to answer the following question: should algorithmic tacit collusion be prohibited under EU competition law? By algorithmic tacit collusion, we mean the capability of algorithmic pricing agents to unilaterally engage into tacitly collusive strategies without human intervention (we also call it ‘machine-to-machine cooperation’ or ‘algorithmic interdependent pricing’). Essentially, this practice raises the very same issues as the well-known oligopoly problem. Therefore, to make it prohibited one could envisage the traditional proposed solution of disentangling the categories of article 101 TFEU from the notions of an ‘act of reciprocal communication between firms’ or ‘meeting of minds’. The paper sets out to discuss this option and its implications. It argues that, from a competition law standpoint, although algorithmic tacit collusion remains undesirable, the notions of agreement and concerted practices should not be changed to encompass it. Rather, it embraces a regulatory perspective referred to as ‘algorithms by design’ which relies on introducing a legal obligation for firms to program algorithms in such a way as to prevent them from setting oligopolistic prices. In particular, while exploring this regulatory proposal, the paper discusses the peculiar case of algorithms that, though designed not to violate antitrust law, end up charging collusive prices. In this regard, the paper develops a second proposal: it introduces the idea of ‘outcome visibility’ to nail firms to their responsibility. This concept implies the idea that even if firms are not aware that their pricing algorithms are implementing a collusive strategy, they cannot ignore their visible market outcome.