Out-Law News 1 min. read

Use of algorithms must respect competition rules, says EU competition official

Businesses that wish to use computer algorithms to control the way they price their goods must ensure the software operates in accordance with competition laws, the director-general for competition at the European Commission has said.

Johannes Laitenberger told a conference in Brussels (9-page / 515KB PDF) that companies cannot "hide behind algorithms" to excuse activity that breaches competition law. He endorsed comments made by EU competition commissioner Margrethe Vestager earlier this year who advocated "antitrust compliance by design".

Laitenberger said: "This means that respect for competition rules must be baked into the algorithms as they are implemented. To think of it, it's the ultimate compliance programme. When you instruct a piece of software not to collude with your rivals, it will follow your instructions without question or hesitation."

"In sum, algorithms are configured and used by companies, and these can be held liable when illegal behaviour takes place through algorithms," he said.

Competition law specialist Alan Davis of Pinsent Masons, the law firm behind Out-Law.com, said that competition authorities around the world, including in the UK and at EU level, are "increasingly alert to the risks of competitive or consumer harm arising from the use of big data and digital tools", such as algorithms.

"The Commission is sending a strong warning that companies can be found to have breached competition law when prices are aligned between competitors as a result of the use of self-learning algorithms," Davis said. "However, there must still be some sort of agreement or understanding reached between the rival companies as to the use of the software tool. The unilateral use by a company of software to monitor its competitors’ prices and automatically adjust prices would not breach competition law."

"In the UK, the Competition and Markets Authority last year concluded an investigation which led to an online poster and picture frame seller admitting to having agreed with a competing online seller that they would not undercut each other’s prices for posters and frames sold on Amazon’s UK website. They had implemented the agreement by using automated repricing software which the parties each configured to give effect to the pricing agreement," Davis said.

Trod, trading as Buy 4 Less, Buy For Less and Buy-For-Less-Online, was fined £163,371 in August 2016 for breaching UK competition laws that prohibit agreements, practices and conduct that have as their object or effect the prevention, restriction or distortion of competition and which may affect trade within the UK.

The CMA's investigation found that Trod had agreed with another UK business, GB Posters, that they would "not undercut each other’s prices for posters and frames sold on Amazon’s UK website" for a period of more than four years.

A senior executive at Trod, Daniel Aston, subsequently signed a disqualification undertaking with the CMA. The undertaking disqualified him from being a director of another UK company for five years.

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