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> If a subset of companies use the exact same algorithm for price discovery, is there a form of price-fixing? This is the key question being argued. Maybe so b
by CPLX 3y ago
> If a subset of companies use the exact same algorithm for price discovery, is there a form of price-fixing? This is the key question being argued.
Maybe so but this is far worse than that.
This is actual coordination, like just literal price fixing. For example the software requires users to actively ask for an override if they deviate from the recommendation. It's pretty literally a "trust" in the old school sense, of some kind of organization that coordinates actors across a sector.
Price discovery is probably also already illegal, but there's at least one layer removed, in the sense that competitors are sharing price data with each other and using the same algorithmic tools but coming to their own conclusions.
My view is that also is and should be illegal, and I hope you're right that the whole approach will be under scrutiny right now.
But the rent one is even more clear cut, it's almost impossible to justify unless you're using motivated reasoning to pretend that it's somehow different if you do it in a SaaS platform instead of a conference call or in a smoke filled room.
- alephnerd 3y ago> This is actual coordination This hasn't been decided yet. If 10 companies uses ACME CO's proprietary funded algorithm for price discovery, are those 10 companies commiting price fixing or not? They never explicitly chatted with each other to use ACME Co, yet they all profit from ACME Co's singular results. Is this price fixing or not? We don't legally know yet.
- fbdab103 3y agoI assume this broadly falls into the category of "tacit collusion"[0]. Wikipedia had a blurb on algorithmic tacit collusion was previously noted: >A few years ago, two companies were selling a textbook called The Making of a Fly. One of those sellers used an algorithm which essentially matched its rival’s price. That rival had an algorithm which always set a price 27% higher than the first. The result was that prices kept spiralling upwards, until finally someone noticed what was going on, and adjusted the price manually. By that time, the book was selling – or rather, not selling – for 23 million dollars a copy. >The book "The Making of a Fly" by Peter Anthony Lawrence, written in 1992, briefly achieved a price of $23,698,655.93 on Amazon in 2011.[25] An OECD Competition Committee Roundtable "Algorithms and Collusion" took place in June 2017 in order to address the risk of possible anti-competitive behaviour by algorithms.[26] [0] https://en.wikipedia.org/wiki/Tacit_collusion https://en.wikipedia.org/wiki/Tacit_collusion
- constantly 3y agoI don’t think they mean in a legal sense. That’s undecided, you’re right. In a common sense, dictionary usage of the phrase, it is absolutely coordination.
- CPLX 3y agoI also mean in a legal sense. And yes the dictionary meaning too. It’s just openly and obviously collusion. Antitrust enforcement in this country has completely collapsed for a generation and the plain meaning of laws has been ignored a lot. It’s pretty clear that’s what they’ve been counting on here. Might work we’ll see.
- enjo 3y agoThis case isn’t going to be decided on “is using the same algorithm collusion”. It’s going to be the fact that you are contractually bound to use RealPage’s rent number or face expulsion. There is a bunch of law dating back more than 100 years about exactly that type of trust.
- btown 3y agoOh wow, you're absolutely right. Somehow I missed that from the OP: > The software company actively "polices" landlords to ensure that they comply with the rent cost it generates, the lawsuit alleges. Failure to impose the RealPage rents could lead to landlords being expelled from the organization, according to the suit.
- deleted 3y ago[deleted]
- zajio1am 3y agoPrice fixing is problematic only because it allows producers to collude and force above-market price and restrict supply. That is problematic in markets with elastic supply, where price competition could change supply of individual market participants, but not in inelastic/fixed-supply market like rental market. One could verify if this price discovery caused above-market price by comparing vacant rental rate. If it is higher than would be expected, then one could argue price discovery algorithms caused price fixing of above-market rate. If it is not, then it is just an efficient way to discover true market rate and there is no damage by using it.
- rapind 3y ago> efficient way to discover true market rate and there is no damage by using it. The algorithms are optimizing price instead of vacancy. I don't think we can assume these are one and the same (price and vacancy) because there are ongoing cost differences between vacant and occupied property. As an extremely unlikely scenario, what if the algorithm determines it's optimal to rent only 20% of your listings to scarcity whales at 4 times the price leaving 80% vacant due to maintenance costs and other factors? From a market perspective, that's absolutely fine, but from a society perspective it's pretty horrible.
- chii 3y ago> From a market perspective, that's absolutely fine, but from a society perspective it's pretty horrible. which is where vacancy penalty should be imposed by the gov't to prevent this undesired behaviour - if the constituents vote for such measures of course.
- zajio1am 3y agoThat is what i address in the second paragraph: if vacancy rate is higher than would be expected, then one could argue price discovery algorithms caused price fixing of above-market rate.
- ehnto 3y agoIt is still problematic for the same reasons, they just don't have to handle fixing the supply as well. That said, it would be naive to assume this conversation is disconnected from lobbying against housing supply programs and zoning that keeps supply of homes low as well.