Harmful Signals - Cartel Prohibition and Oligopoly Theory in the Age of Machine Learning

27 Pages Posted: 10 Jun 2019 Last revised: 30 Jun 2019

See all articles by Stefan Thomas

Stefan Thomas

University of Tuebingen - Faculty of Law

Date Written: May 16, 2019

Abstract

The classical legal approach for distinguishing between illicit collusion and legitimate oligopoly conduct is to rely on proxies, such as elements of “practical cooperation”, on “plus factors”, or on the finding of an anticompetitive intent among rival firms. These criteria ultimately relate to the inner sphere of natural persons and its emanations in communicative acts. Some authors therefore conclude that the cartel prohibition of Article 101 TFEU or Section 1 of the U.S. Sherman Act are unable to capture collusion if it is achieved by autonomously acting computers relying on machine learning capabilities. It is instead suggested here to define collusion as parallel informational signals, which achieve a supracompetitive equilibrium, and to use the consumer welfare standard as a proxy for distinguishing between illicit collusion and legitimate oligopoly conduct. This approach is not tantamount to the idea of prohibiting tacit collusion as such. Rather, it is to check singular elements of communication, i.e. “informational signals”, within an existing oligopolistic setting for their propensity to create a consumer harm. This approach can help to close potential regulatory gaps currently associated with the surge of algorithmic pricing.

Keywords: algorithms, cartel, collusion, machine learning, oligopoly, signaling

JEL Classification: K21, L13, L41

Suggested Citation

Thomas, Stefan, Harmful Signals - Cartel Prohibition and Oligopoly Theory in the Age of Machine Learning (May 16, 2019). Available at SSRN: https://ssrn.com/abstract=3392860 or http://dx.doi.org/10.2139/ssrn.3392860

Stefan Thomas (Contact Author)

University of Tuebingen - Faculty of Law ( email )

Geschwister Scholl Platz
Tuebingen, 72074
Germany
0049-7071-29-72556 (Phone)
0049-7071-29-2105 (Fax)

HOME PAGE: http://www.jura.uni-tuebingen.de/professoren_und_dozenten/thomas

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