‘Fares hiked due to higher demand’: Pricing algorithms threaten to tip fine balance between consumer protection, market competition | FirstPost

One such manifestation of such technological developments as indicated in the Vidhi Report are pricing algorithms. Such pricing algorithms are commonly employed by online businesses, particularly in airline, hotel booking and road transport industries, which heavily rely on sophisticated pricing tools to determine and update their prices. For instance, it is common to experience surge pricing at peak hours by cab aggregators. Similarly, airline tickets for certain routes are priced higher than other routes with similar distance.

Further, tickets booked on particular dates may be higher as compared to other dates. Such pricing is executed by algorithms which tend to automatically calculate prices based on real-time assessment of demand and supply and specified targets. Needless to mention companies may adopt different mechanisms to design their algorithms. For instance, pricing algorithms in case of airline tickets may use pricing variables like route competition, route distance, seat demand, etc to determine such prices.

With the widespread use of pricing algorithms, commentators have raised concerns of possible anti-competitive effects of algorithms. It is argued that such pricing algorithms can facilitate prevailing forms of collusion and also pave ways for businesses to collude in a manner beyond the traditional understanding of ‘agreement’ or ‘meeting of minds’ between competitors, thereby reducing human intervention to the minimum.

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‘Fares hiked due to higher demand’: Pricing algorithms threaten to tip fine balance between consumer protection, market competition.