Algorithmic Predation and Exclusion

33 Pages Posted: 11 Jan 2022

See all articles by Thomas K. Cheng

Thomas K. Cheng

The University of Hong Kong - Faculty of Law

Julian Nowag

Lund University - Faculty of Law; Oxford Centre for Competition Law and Policy

Date Written: October 1, 2021

Abstract

The debate about the implications of algorithms on competition law enforcement has so far focused on multi-firm conduct in general and collusion in particular. The implications of algorithms on abuse of dominance have been largely neglected. This article seeks to fill the gap in the existing literature by exploring how the increasingly precise practice of individualized targeting by algorithms can facilitate the practice of a range of abuses of dominance, including predatory pricing, rebates, and tying and bundling. The ability to target disparate groups of consumers with different prices helps a predator to minimize the losses it sustains during predation and maximize its ability to recoup its losses. This changes how recoupment should be understood and ascertained and may even undermine the rationale for requiring a proof of likelihood of recoupment under US antitrust law. This increased ability to price discriminate also enhances a dominant firm’s ability to offer exclusionary rebates. Finally, algorithms allow dominant firms to target their tying and bundling practices to loyal customers, hence avoiding the risk of alienating marginal customers with an unwelcome tie. This renders tying and bundling more feasible and effective for dominant firms.

Keywords: antitrust, competition law, monopolization, dominance, algorithms, big data, exclusion, predatory pricing, rebate, tying and bundling

JEL Classification: L41

Suggested Citation

Cheng, Thomas K. and Nowag, Julian, Algorithmic Predation and Exclusion (October 1, 2021). LundLawCompWP 1/2022 , University of Hong Kong Faculty of Law Research Paper No. 2022/05, Available at SSRN: https://ssrn.com/abstract=4003309 or http://dx.doi.org/10.2139/ssrn.4003309

Thomas K. Cheng

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01242

Julian Nowag (Contact Author)

Lund University - Faculty of Law ( email )

Lilla Gråbrödersgatan 4
Lund, 222 22
Sweden

Oxford Centre for Competition Law and Policy ( email )

St Cross Building
St Cross Road Oxford
Oxford, OX1 3UL
United Kingdom

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