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AI’s Impact on Antitrust and Competition Law Issues

Competition enforcement agencies around the world are studying the potential impact of artificial intelligence (AI) on market competition. As these enforcement agencies dig deeper and study AI-related activities in the market, questions inevitably will arise and competition uncertainty will likely increase. Questions about whether it is possible for companies to use AI as a means of colluding, with limited or no human involvement, are likely to proliferate. As questions multiply, regulatory scrutiny and competition-related risk are also likely to increase.

What creates the risk? In an earlier era, antitrust authorities would have looked for evidence produced in a smoked-filled room of competitors. Today, AI could facilitate pricing collusion through price monitoring and matching algorithmic software. While companies may intelligently adapt their prices to those of their competitors, they cannot exchange information on future pricing intentions either directly or indirectly (e.g., through price signaling). This poses a new compliance challenge for companies using price matching and monitoring algorithms or implementing blockchains to implement smart contracts, particularly companies in markets with only a few large competitors. In other examples, AI could facilitate exploitation of market power (through discrimination and bias) or foreclosure of competitors. This can happen through a merger or an exclusive cooperation agreement resulting in the combination of a large and unique set of “Big Data”; or it can happen where a dominant company holding such large and unique set of “Big Data” leverages it to discriminate against its competitors or customers.

At the same time, enforcement agencies recognize that AI also can enhance competition by facilitating targeted marketing and rapid competitive responses to price changes, which may ultimately provide more competition, lower prices and better services for customers.

Where to draw the line? Defining a benchmark for illegality requires assessing whether any illegal action was anticipated or planned (e.g., through AI programming instructions) or whether a particular outcome could have reasonably been foreseen, even when there has been no human agreement. Some enforcement agencies (notably, the EU Commission) have stated that AI remains under a firm’s direction and control and, therefore, the firm is liable for the actions taken by the algorithm – even if not fully understood by the individuals who developed or used it. Moreover, antitrust agencies have prosecuted and sanctioned mere facilitators of illegal conduct (such as business-to-business service platforms) as if they took part in the illegal conduct itself. Answering the question of who is liable for the decisions and actions of AI is, therefore, far from straightforward; it will depend on the factual context of each case and may vary in different jurisdictions applying different legal tests (which are a separate concept from contractual liability).

Our Competition – Antitrust team is tech perceptive and deeply familiar with the potential issues arising from the use of AI. We can offer creative, business-oriented solutions to mitigate antitrust risks and to disentangle the procompetitive effects of AI from its anticompetitive effects. In particular, our experience includes:

  • Defending and bringing complaints against companies in connection with global competition law investigations, including the successful closure of an investigation by the EU Commission and the UK Competition and Markets Authority into an alleged price fixing practice by way of agreed commitments (Global Competition Review Award: Behavioral Matter of the Year – Europe).
  • Advising various technology companies in successfully devising global antitrust compliance strategies, including conducting antitrust compliance audit programs and offering remedial reprogramming options for non-compliant algorithms.
  • Coordinating global merger control filing strategies in many high-profile transactions, including successfully negotiating a settlement in return for merger control clearance of a multibillion-dollar acquisition involving two global home appliances and Internet of Things manufacturers.
  • Advising various private and government clients on regulatory and policy reforms related to the application of antitrust law to the use of artificial intelligence, including speaking on “Artificial Intelligence and Competition Issues” at the International Institute of Communications Telecommunications and Media Forum in Brussels in April 2018.