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Introduction to the joint study ‘Algorithms and Competition’ released by the Autorité de la Concurrence and the Bundeskartellamt

Image Credit: Markus Spiske via Unsplash

Gabriele Carovano

14th January 2020

The rise of digital platforms and other innovations has transformed markets’ dynamics. Although digitalisation may concern different aspects of an economy, understanding these news markets’ dynamics is of paramount importance for competition authorities. Whereas some competition authorities (CAs) have conducted studies of their own1, others have commissioned external reports2. Moreover, also several international organisations have studied digital competition issues3 and recently the G7 competition authorities issued a “Common understanding” setting out their views on the challenges of digitalisation for competition policy.

From this perspective, the joint market study on ‘Algorithms and Competition’ released on November 2019 by the French Autorité de la Concurrence and the German Bundeskartellamt is of utmost relevance. The study, while recognising that algorithms are among the key technological drivers of firms’ innovation and efficiencies, explores their potential detrimental effects on competition and the different ways in which they may affect strategic interactions between companies, potentially leading to horizontal collusion.

The joint study addresses the potential competitive risks associated with the use of algorithms and it is structured as follow:

In part II it elaborates on the concept of algorithm as well as on different types and fields of application and categorises them in several ways: (i) by the task they perform, (ii) by the input parameters they use, or (iii) by the involved learning method.

In part III, the study focusses on the different ways in which algorithms may affect companies’ interactions, potentially leading to horizontal collusion.Specifically, part III investigates the use of pricing algorithms considering three different scenarios: (i) firstly, the study covers situations in which the algorithm only comes into play in a second step to support or facilitate the implementation, monitoring, enforcement or concealment of a “traditional” anticompetitive practice; (ii) secondly, the study covers situations where although there is no prior direct communication or contact between competitors, a certain degree of alignment could nevertheless arise as a result of the actions of a third party that provides the same algorithm or somehow coordinated algorithms to competitors; (iii) thirdly, the study analysed the scenario where algorithms are unilaterally designed and implemented with no prior or ongoing communication or contact between undertakings. Still, the fact that several or even all competitors rely on pricing algorithms might facilitate an alignment of their market behaviour, resulting from a mere interaction of computers.

In part IV, the study discusses practical challenges CAs may face when investigating algorithms. Particularly, it first describes potential types of evidence that might be used to establish a competition law infringement and subsequently outlining ways to obtain and analyse relevant information. In Part V, the study concludes with a tentative outlook for the tasks of CAs deriving from the study.

Finally, the joint study on ‘Algorithms and Competition’ by the Autorité de la concurrence and the Bundeskartellamt is of utmost significance as it consolidates the established international partnership existing among the two institutions. This is a partnership that already expressed its potential with the publication of the first joint study on Competition Law and Data. It represents a leading example of co-operation among EU national competition authorities (NCAs), which should be imitated by other NCAs both within and outside regional competition frameworks. International co-operation, indeed, as established by the G7 NCAs’ “Common understanding” is key to tackle the cross-border dimensions of digital competition challenges and needs to be strengthened and further developed. From this perspective, the Franco-German joint studies definitely go in the right direction and pave the way for further forms of international co-operations among NCAs. As the last joint study itself points out, as digital markets evolve “authorities should continue expanding their expertise on algorithms, in an exchange with each other as well as by interacting with businesses, academics and other regulatory bodies”.4

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The views expressed herein are those of the author.

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1.This has been the case, among others, in in Italy, Canada, Australia, Portugal, France and Germany. See https://www.concurrences.com/IMG/pdf/agcm_-_autorita_garante_della_concorrenza_e_del_mercato-7.pdf?51760/e0bb8e15333a93d3f362c8b221d3310d0ab89b55; https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04342.html; Australia Report: Australian Competition & Consumer Commission (2019), “Digital Platforms Inquiry: Final Report”, https://www.accc.gov.au/system/files/Digital%20platforms%20inquiry%20-%20final%20report.pdf; http://www.concorrencia.pt/vEN/News_Events/Comunicados/Documents/Digital%20Ecosystems%20Executive%20Summary.pdf; Bundeskartellamnt - Autorité de la Concurrance joint report on Competition Law and Data: http://www.autoritedelaconcurrence.fr/doc/reportcompetitionlawanddatafinal.pdf

2.This has been the case, among others, in the UK, the EU, the US, Germany, and Japan. See UK Report Digital Competition Expert Panel (2019), “Unlocking digital competition”, https://www.gov.uk/government/publications/unlocking-digital-competition-report-of-the-digital-competition-expert-panel; EU report “Competition Policy for the digital era”, available at: https://ec.europa.eu/competition/publications/reports/kd0419345enn.pdf; Michael Reich, Germany sets up body to lead modernisation of competition law, CPI, Sept. 2018, available at:https://www.competitionpolicyinternational.com/germany-sets-up-body-to-lead-modernisation-of-competition-law/; Stigler Center, Stigler Committee on Digital Platforms, 2019, available at: https://research.chicagobooth.edu/-/media/research/stigler/pdfs/digital-platforms---committee-report---stigler-center.pdf?la=en&hash=2D23583FF8BCC560B7FEF7A81E1F95C1DDC5225E&hash=2D23583FF8BCC560B7FEF7A81E1F95C1DDC5225E.

3.Among others, see OECD, Algorithms and Collusion, 2017, available at:http://www.oecd.org/competition/algorithms-collusion-competition-policy-in-the-digital- age.htm; OECD, Merger control in dynamic markets, 2019, available at: https://one.oecd.org/document/DAF/COMP/GF(2019)8/en/pdf; OECD, Personalised pricing in the digital era, 2019, available at: https://one.oecd.org/document/DAF/COMP(2018)13/en/pdf; OECD, Quality considerations in the zero-price economy, 2019, available at: https://one.oecd.org/document/DAF/COMP(2018)14/en/pdf; OECD, Implications of E-Commerce for Competition Policy, 2018, available at: https://one.oecd.org/document/DAF/COMP(2018)3/en/pdf; OECD, Blockchain Technology and Competition Policy, 2018, available at: https://one.oecd.org/document/DAF/COMP/WD(2018)47/en/pdf; UNCTAD, Competition Issues in the Digital Economy, 2019, available at: https://unctad.org/meetings/en/SessionalDocuments/ciclpd54_en.pdf

4.See Bundeskartellamnt - Autorité de la Concurrance, joint report on Algorithms and Competition, p. 77, available at: https://www.autoritedelaconcurrence.fr/sites/default/files/algorithms-and-competition.pdf