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IIUC it’s still valid to use an algorithm to recommend prices, but you’re not allowed to make an agreement with a competitor that you will both use the same alg

IIUC it’s still valid to use an algorithm to recommend prices, but you’re not allowed to make an agreement with a competitor that you will both use the same alg? Or is this saying that any algorithm which takes competitor prices into account is out-of-bounds?

spamizbad 3y ago
The former (you can’t collude with a competitor to use the same algorithm to set prices)
- lazide 3y ago
  How can you collude with someone you don’t communicate with in any way?
  - dkjaudyeqooe 3y ago
    By using a third party software or service that sets a price, knowing that your competitors are doing the same.
    - SoftTalker 3y ago
      Is it collusion to go to a rental search site and survey the asking rents, then asking similar for your property, knowing that your competitors are (probably) doing the same? Is it collusion when a gas station manager drives around the neighborhood, looks at the competitors posted price for gas, and sets his prices the same?
      - dkjaudyeqooe 3y ago
        Neither of those examples are what I described and are perfectly fine. You have to use a third party that is setting a price and stick to that, knowing others are doing the same. You're describing individuals determining their own price using their own judgement.
      - dugite-code 3y ago
        I think the argument in this case is the algorithm is effectively acting as a single agent that will always come to a fixed price and is actively recommending having vacancies to prevent competition. Where as if individuals are assessing the prices they are in a sort of prisoners dilemma, if they leave a property vacant someone may lower the average price meaning they can't recoup the lost earnings when it is occupied. So their best bet is to keep a property occupied as much as possible.
        lazide 3y ago
        Eh, I'm really not convinced they'd be effective. If they're trying, then sure whack them with price fixing charges. I'm just not aware of any markets where these guys are dominant. You STILL have the prisoners dilemma issue, as there are tons of smaller landlords out there that definitely aren't playing in this game no matter what you're doing. And I don't see how this is THAT much different from just doing a search for rental properties in your area on zillow and setting your rent prices accordingly. If THAT is price fixing, then how does anyone expect a market to work at all?
      - makeitdouble 3y ago
        IANAL but it probably would it you did it whatever the circumstances. If you were the cheapest gas station in the neighborhood with prices appropriate to your operation but one day decide to align your price to your competitors and keep adjusting your price to whatever they set while nothing changed for you, that feels like the very definition of price fixing.
        lazide 3y ago
        The weird thing for me here is... huh? Who isn't going to set their prices relative to their competitors in a market? And also try to have as low a cost as possible, so they have as good a profit margin as possible? It's basic business 101. If THAT is price fixing, then literally every business ever in the history of business has done price fixing. That also isn't colluding with anyone, near as I can tell. Maybe if you did a wink-wink-nod-nod to each other while driving by? Typically when I've heard of price fixing, there was some explicit cartel or industry assoc or meeting between folks or whatever where they could actually agree to something, punish 'non compliance', etc. This feels like the Google Antitrust case, where no one can even seem to say what they would have reasonably expected Google to do instead that would make any sense, and the issue is more that there are as-yet-unresolved structural components that no one is able to articulate a rule that would prevent whatever problem everyone is getting worked up about.
        makeitdouble 3y ago
        > Who isn't going to set their prices relative to their competitors in a market? And also try to have as low a cost as possible, so they have as good a profit margin as possible? It's basic business 101. The text book behavior would be to price yourself lower than the competitors and try to get market share from them. In our current paradigm, if you have low costs while keeping your price as high as the incumbent, there should be other players entering the market and disrupting it by going for lower margins. That mechanism not happening even as there's a variety of actors in the market is where it's qualified as "price fixing" IMHO. PS: about Google's antitrust case, are you refering to them stopping other stores from getting installed on android phones ?
  - fragmede 3y ago
    "in any way" is doing a lot of work there though. The way they're using a 3rd party algorithm is effectively communication and the FTC isn't standing for it.
  - dragonwriter 3y ago
    Communicating with a common intermediary is, or at least can be, indirect communication. This was, e.g., the case in the major ebook price fixing case where Apple was the common intermediary between the publishers.
  - lodovic 3y ago
    Everyone is colluding with the middle man
bobthepanda 3y ago
There were antitrust suits filed against RealPage after a ProPublica piece > In one news release, Realpage offered its property management clients the ability to outsource daily rent-setting and revenue oversight. “We believe in overseeing properties as though we own them ourselves,” the company said in a presentation that plaintiffs’ lawyers referenced in the lawsuit. > The lawsuit quoted one unnamed witness, a RealPage pricing advisor, saying that some pricing advisors told property management employees that they had to follow the software’s recommendations. A leasing manager at a RealPage client said, “I knew [RealPage’s prices] were way too high, but [RealPage] barely budged” when the manager asked to deviate from the suggested rent. > An update to the software tracked not only clients’ acceptance rate, but also the identity of the landlords’ staff members who had requested a deviation from RealPage’s price, the lawsuit said. Compensation for some property management personnel was even tied to compliance with the company’s recommendations, it said. So if this is true, this also means that managers are being compelled to adopt the recommendations more than as mere suggestions. https://www.propublica.org/article/doj-backs-tenants-price-fixing-case-big-landlords-real-estate-tech https://www.propublica.org/article/doj-backs-tenants-price-f...
__s 3y ago
Reading linked doc, sounds like first But yeah, your latter case sounds easy to fall into gray territory, since it seems illegal to agree on prices even if intermediary makes it unclear with whom exactly you're agreeing with
advisedwang 3y ago
The law doesn't work on hard and fast rules like that. It's more like "If the effect is that you are working together to set prices, that's illegal", regardless of whether you use algorithm A or B, regardless of whether you share prices in advance or watch how other companies set prices, regardless of any details of the mechanism. If you use the same algorithm it's not necessarily illegal, but it will be if it results in price fixing. If you take into account competitors prices its not necessarily illegal, but it will be if it results in price fixing.
- lazide 3y ago
  What is the definition of price fixing in this world?
  - makeitdouble 3y ago
    Reducing consumer choice by artificially setting sinilar prices as comptitors.
  - ClumsyPilot 3y ago
    Taking competition our from the market mechanism
  - StewardMcOy 3y ago
    We can start with what is definitely price fixing and work our way up to why algorithmic pricing is price fixing. To keep things simple, let's say a city has two landlords, Alice and Bob, who each own around half of the residential rental properties in the city. Textbook definition of price fixing is if Bob and Alice agree to never rent for less than $5 per square foot. Next scenario: Instead of a minimum price, let's say that Bob and Alice agree a formula on how to price their properties based on vacancies. The formula can be as simple or as complicated as you like. But in this scenario, if the formula never gives them a result less than $5/square foot, it has the exact same outcome as the textbook scenario. And since there is direct coordination between Bob and Alice, this is definitely price fixing. In fact, it's even worse than the textbook scenario, because now they're coordinating on exact prices, and not just a minimum. Forgetting formulas for a minute, let's say Charlie, who is unrelated to Alice and Bob, approached them separately and offered to sell them information on how to set their prices. In this case, there's no algorithm involved. They each pay Charlie a small fee per month, and he tells them not to rent for less than $5 per square foot. There's no direct communication between Bob and Alice, but because they both know that the other is acting on the same advice from Charlie, the result is the same as the textbook scenario. You could even argue that there is indirect communication between them, and that Charlie is running some kind of price laundering service. Finally, you can combine the two. Bob and Alice both tell Charlie how many vacancies, delinquent payments, etc. they have. Charlie feeds all the data into his computer, which contains a really complicated formula, and that computer tells them how much to charge. And wouldn't you know it, that formula never produces a result less than $5/square foot. Again, because Bob and Alice know that the other is using this service, and because they have an exact price, rather than a minimum, they know they don't have to negotiate with potential customers. The other landlord won't give that customer a better deal.
rocqua 3y ago
A situation where you could offload pricefixing to the algorithm is bad. Any algorithms that can't do the price fixing for you are fine.

spamizbad 3y ago

The former (you can’t collude with a competitor to use the same algorithm to set prices)

lazide 3y ago
How can you collude with someone you don’t communicate with in any way?
- dkjaudyeqooe 3y ago
  By using a third party software or service that sets a price, knowing that your competitors are doing the same.
  - SoftTalker 3y ago
    Is it collusion to go to a rental search site and survey the asking rents, then asking similar for your property, knowing that your competitors are (probably) doing the same? Is it collusion when a gas station manager drives around the neighborhood, looks at the competitors posted price for gas, and sets his prices the same?
    - dkjaudyeqooe 3y ago
      Neither of those examples are what I described and are perfectly fine. You have to use a third party that is setting a price and stick to that, knowing others are doing the same. You're describing individuals determining their own price using their own judgement.
    - dugite-code 3y ago
      I think the argument in this case is the algorithm is effectively acting as a single agent that will always come to a fixed price and is actively recommending having vacancies to prevent competition. Where as if individuals are assessing the prices they are in a sort of prisoners dilemma, if they leave a property vacant someone may lower the average price meaning they can't recoup the lost earnings when it is occupied. So their best bet is to keep a property occupied as much as possible.
      - lazide 3y ago
        Eh, I'm really not convinced they'd be effective. If they're trying, then sure whack them with price fixing charges. I'm just not aware of any markets where these guys are dominant. You STILL have the prisoners dilemma issue, as there are tons of smaller landlords out there that definitely aren't playing in this game no matter what you're doing. And I don't see how this is THAT much different from just doing a search for rental properties in your area on zillow and setting your rent prices accordingly. If THAT is price fixing, then how does anyone expect a market to work at all?
    - makeitdouble 3y ago
      IANAL but it probably would it you did it whatever the circumstances. If you were the cheapest gas station in the neighborhood with prices appropriate to your operation but one day decide to align your price to your competitors and keep adjusting your price to whatever they set while nothing changed for you, that feels like the very definition of price fixing.
      - lazide 3y ago
        The weird thing for me here is... huh? Who isn't going to set their prices relative to their competitors in a market? And also try to have as low a cost as possible, so they have as good a profit margin as possible? It's basic business 101. If THAT is price fixing, then literally every business ever in the history of business has done price fixing. That also isn't colluding with anyone, near as I can tell. Maybe if you did a wink-wink-nod-nod to each other while driving by? Typically when I've heard of price fixing, there was some explicit cartel or industry assoc or meeting between folks or whatever where they could actually agree to something, punish 'non compliance', etc. This feels like the Google Antitrust case, where no one can even seem to say what they would have reasonably expected Google to do instead that would make any sense, and the issue is more that there are as-yet-unresolved structural components that no one is able to articulate a rule that would prevent whatever problem everyone is getting worked up about.
        makeitdouble 3y ago
        > Who isn't going to set their prices relative to their competitors in a market? And also try to have as low a cost as possible, so they have as good a profit margin as possible? It's basic business 101. The text book behavior would be to price yourself lower than the competitors and try to get market share from them. In our current paradigm, if you have low costs while keeping your price as high as the incumbent, there should be other players entering the market and disrupting it by going for lower margins. That mechanism not happening even as there's a variety of actors in the market is where it's qualified as "price fixing" IMHO. PS: about Google's antitrust case, are you refering to them stopping other stores from getting installed on android phones ?
- fragmede 3y ago
  "in any way" is doing a lot of work there though. The way they're using a 3rd party algorithm is effectively communication and the FTC isn't standing for it.
- dragonwriter 3y ago
  Communicating with a common intermediary is, or at least can be, indirect communication. This was, e.g., the case in the major ebook price fixing case where Apple was the common intermediary between the publishers.
- lodovic 3y ago
  Everyone is colluding with the middle man

bobthepanda 3y ago

There were antitrust suits filed against RealPage after a ProPublica piece > In one news release, Realpage offered its property management clients the ability to outsource daily rent-setting and revenue oversight. “We believe in overseeing properties as though we own them ourselves,” the company said in a presentation that plaintiffs’ lawyers referenced in the lawsuit. > The lawsuit quoted one unnamed witness, a RealPage pricing advisor, saying that some pricing advisors told property management employees that they had to follow the software’s recommendations. A leasing manager at a RealPage client said, “I knew [RealPage’s prices] were way too high, but [RealPage] barely budged” when the manager asked to deviate from the suggested rent. > An update to the software tracked not only clients’ acceptance rate, but also the identity of the landlords’ staff members who had requested a deviation from RealPage’s price, the lawsuit said. Compensation for some property management personnel was even tied to compliance with the company’s recommendations, it said. So if this is true, this also means that managers are being compelled to adopt the recommendations more than as mere suggestions. https://www.propublica.org/article/doj-backs-tenants-price-fixing-case-big-landlords-real-estate-tech https://www.propublica.org/article/doj-backs-tenants-price-f...

__s 3y ago

Reading linked doc, sounds like first But yeah, your latter case sounds easy to fall into gray territory, since it seems illegal to agree on prices even if intermediary makes it unclear with whom exactly you're agreeing with

advisedwang 3y ago

The law doesn't work on hard and fast rules like that. It's more like "If the effect is that you are working together to set prices, that's illegal", regardless of whether you use algorithm A or B, regardless of whether you share prices in advance or watch how other companies set prices, regardless of any details of the mechanism. If you use the same algorithm it's not necessarily illegal, but it will be if it results in price fixing. If you take into account competitors prices its not necessarily illegal, but it will be if it results in price fixing.

lazide 3y ago
What is the definition of price fixing in this world?
- makeitdouble 3y ago
  Reducing consumer choice by artificially setting sinilar prices as comptitors.
- ClumsyPilot 3y ago
  Taking competition our from the market mechanism
- StewardMcOy 3y ago
  We can start with what is definitely price fixing and work our way up to why algorithmic pricing is price fixing. To keep things simple, let's say a city has two landlords, Alice and Bob, who each own around half of the residential rental properties in the city. Textbook definition of price fixing is if Bob and Alice agree to never rent for less than $5 per square foot. Next scenario: Instead of a minimum price, let's say that Bob and Alice agree a formula on how to price their properties based on vacancies. The formula can be as simple or as complicated as you like. But in this scenario, if the formula never gives them a result less than $5/square foot, it has the exact same outcome as the textbook scenario. And since there is direct coordination between Bob and Alice, this is definitely price fixing. In fact, it's even worse than the textbook scenario, because now they're coordinating on exact prices, and not just a minimum. Forgetting formulas for a minute, let's say Charlie, who is unrelated to Alice and Bob, approached them separately and offered to sell them information on how to set their prices. In this case, there's no algorithm involved. They each pay Charlie a small fee per month, and he tells them not to rent for less than $5 per square foot. There's no direct communication between Bob and Alice, but because they both know that the other is acting on the same advice from Charlie, the result is the same as the textbook scenario. You could even argue that there is indirect communication between them, and that Charlie is running some kind of price laundering service. Finally, you can combine the two. Bob and Alice both tell Charlie how many vacancies, delinquent payments, etc. they have. Charlie feeds all the data into his computer, which contains a really complicated formula, and that computer tells them how much to charge. And wouldn't you know it, that formula never produces a result less than $5/square foot. Again, because Bob and Alice know that the other is using this service, and because they have an exact price, rather than a minimum, they know they don't have to negotiate with potential customers. The other landlord won't give that customer a better deal.

rocqua 3y ago

A situation where you could offload pricefixing to the algorithm is bad. Any algorithms that can't do the price fixing for you are fine.