Algorithmic Pricing in Horizontal Merger Review: An Initial Assessment

Antitrust, Vol. 36, No. 2, Spring 2022.

6 Pages Posted: 11 Jan 2022 Last revised: 19 Apr 2022

See all articles by Ai Deng

Ai Deng

Charles River Associates; Johns Hopkins University; American Bar Association - American Bar Association

Cristián Hernández

NERA Economic Consulting

Date Written: October 21, 2021

Abstract

While the possibility of algorithmic price discrimination and algorithmic collusion has been extensively discussed in the global antitrust community in recent years, there has been much more limited discussion in the context of mergers. In this article, we aim to fill this gap by discussing some potential implications of algorithmic pricing on market definition, unilateral effects, coordinated effects, and remedies. Specifically, we discuss the following topics and related questions:

- Market definition. How to deal with algorithm-enhanced market/customer segmentation and how to identify relevant antitrust markets when prices are set by a “blackbox” algorithm.

- Unilateral effects. How to use merging parties’ pricing algorithms to conduct merger simulations and why there are important antitrust issues related to integrating merging parties’ pricing algorithms and their data.

- Coordinated effects. What some of the recent scholarship tells us about potentially coordinated effects in a merger context.

- Remedies. Why data compatibility and collusion risk are important considerations when “divesting” merging parties’ pricing algorithm.

Keywords: Algorithms, Antitrust, Merger, Market Definition, Unilateral Effects, Coordinated Effects, Remedies

JEL Classification: K21, L4

Suggested Citation

Deng, Ai and Hernández, Cristián, Algorithmic Pricing in Horizontal Merger Review: An Initial Assessment (October 21, 2021). Antitrust, Vol. 36, No. 2, Spring 2022., Available at SSRN: https://ssrn.com/abstract=3971920 or http://dx.doi.org/10.2139/ssrn.3971920

Ai Deng (Contact Author)

Charles River Associates ( email )

1201 F Street NW
Suite 800
Washington, DC DC 20004
United States

Johns Hopkins University ( email )

1717 Massachusetts Ave NW
Washington, DC DC 20036
United States

American Bar Association - American Bar Association ( email )

321 North Clark Street
Chicago, IL 60610
United States

Cristián Hernández

NERA Economic Consulting

1255 23rd Street, NW,
Suite 600
Washington, DC DC 20037
United States

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