Algorithms and Competition in the Digital Economy

e-Competitions, Special issue Algorithms & Competition, October 4, 2023

U of Penn, Inst for Law & Econ Research Paper No. 24-10

17 Pages Posted: 9 Apr 2024 Last revised: 13 Apr 2024

See all articles by Cary Coglianese

Cary Coglianese

University of Pennsylvania Carey Law School

Alicia Lai

Susman Godfrey, LLP; University of Pennsylvania Law School

Date Written: October 4, 2023

Abstract

The global economy is increasingly a digital economy driven by algorithms. This shift to a digital or algorithmic economy poses some distinct implications for how antitrust and consumer protection law evolves in the future. With this Foreword to a special issue published by Concurrences , we highlight major antitrust-related legal developments occurring around the world in response to the rapidly emerging environment of algorithmic-driven commerce. Without necessarily endorsing nor rejecting any of the various policies or proposals that have occurred in recent years, we organize and describe key antitrust-related legal developments that have arisen in response to the growth of the digital economy. In Part I, we detail some of the major legal changes or proposed changes that have targeted digital technology firms. Although many of these targeted firms deploy services that use algorithmic tools, competition authorities have not yet begun to do as much to regulate algorithmic services themselves as to target the firms that make use of them. And even though the specifics of some of the regulatory actions targeting digital firms can be said to be distinctive in their focus on online and other digital businesses, many of the concerns underlying regulatory actions or proposals have been, to date, similar to those that have long applied to general business activity. In Part II, we highlight an aspect of antitrust that might become truly novel in an increasingly algorithmic economy: the targeting of antitrust law and principles to business actions driven by algorithms themselves. As algorithmic tools come to automate economic transactions and autonomously make business decisions, the object of governmental oversight may well shift from the traditional focus on human managers to machine ones—or perhaps to the human designers of machine-learning “managers.” This is an emerging possibility which to date can be most saliently seen in the context of self-preferencing algorithms. Although antitrust enforcers appear thus far to target types of self-preferencing behaviors that have emanated from human decisions rather than fully independent algorithmic ones, it is not hard to conceive a future in which AI autonomously drives business decisions in problematic, anticompetitive directions or that operate on their own to charge supracompetitive prices. Finally, in Part III, in the face of a future that seems likely to be dominated by algorithmic transformations throughout the economy, antitrust regulators can expect to face a growing need themselves to develop and rely upon artificial intelligence and other algorithmic tools. The transition to an algorithmic economy, in the end, not only raises new sources of concern about competition and consumer protection, but it may also provide government with new opportunities to use digital tools to advance the goals of fair and efficient economic competition.

Keywords: artificial intelligence, digital economy, machine learning, antitrust, discriminatory practices, prices, information technology, unfair competition, merger regulation, anticompetitive behavior, consumer protection, competition policy, big tech, algorithms, compliance

JEL Classification: K21, K23, L40, L50

Suggested Citation

Coglianese, Cary and Lai, Alicia, Algorithms and Competition in the Digital Economy (October 4, 2023). e-Competitions, Special issue Algorithms & Competition, October 4, 2023, U of Penn, Inst for Law & Econ Research Paper No. 24-10, Available at SSRN: https://ssrn.com/abstract=4787890

Cary Coglianese (Contact Author)

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-6867 (Phone)

HOME PAGE: http://www.law.upenn.edu/coglianese

Alicia Lai

Susman Godfrey, LLP ( email )

New York, NY
United States

University of Pennsylvania Law School ( email )

Philadelphia, PA 19104
United States
8142066530 (Phone)

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