Algorithms and collusion – Michal GAL – June 2017 OECD discussion

Do Algorithms Facilitate Coordination?

Michal S. Gal

University of Haifa Faculty of Law

1. Agreement

2. Detection

3. Sanction

4. High entry barriers

:Agreement

Speedier calculation

Sophisticated calculation

Rational decision

Known recipe

Strong signal

:Detection Monitor

Distinguish

Sanction: React immediately

Calculate risk Credible threat

High entry barriers must exist

“Digital Shadow” Stronger incentives But more difficult

Market sharing

Data sharing

Market Solutions? Algorithmic Consumers

"I never think of the future. It comes

soon enough..." Albert Einstein

offer more information

Identify the need

execute the transaction

game changer

Lower costs

Speedier decision

More sophisticated

Less decisional energy

Lower consumer biases

Downsides?

Cyber harms Wrong preferences

Reduction in autonomy Psychological effects

Social effects Exercising our decision muscle

Knowing our world Privacy

Anti-discrimination

Anti-collusion

Anti-concentration

Algorithmic Buyer Power Access to Users Access to Data

Domination by the big 5

Legal Questions (Agreement)

• Do algorithms that facilitate coordination fulfill the requirement of “an agreement”, and if so- under which conditions?;

• What exactly do we wish to prohibit and can we spell it out clearly for market participants?;

• Is there justification for widening the regulatory net beyond its current prohibitions, in light of the changing nature of the marketplace.

Agreement?

Simple scenario

“explicit agreement”?

Tacit Collusion

Facilitating Practices

Parallel adoption?

No justification?

Which conduct to prohibit?

Chilling effect

Areeda test

Develop red flags

Deep learning?

Widening the net

how much transparency?

Explainability?

Playing catch up...