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Top 5 Antitrust Issues Facing Companies in the U.S. Today: #3 Pricing | The National Law Review

Prices provide crucial information to buyers and sellers, and so have always been critical to a competitive economy and antitrust law. But the emergence of new online information-harvesting technology and instantaneous transmission of pricing information may lead to new versions of antitrust issues, including anticompetitive price fixing arrangements and disputes about distributors’ pricing.

Pricing Algorithms and Price Scraping
New pricing technology has emerged rapidly over the past few years, and with it new challenges for companies trying to maintain their competitive edge while avoiding costly antitrust lawsuits and investigations. Online services, such as Mozenda and Upstream Commerce, promise to “optimize” product pricing through the acquisition of competitors’ prices and product information. Commonly referred to as “price scraping,” these services use computer software (called “bots”) to extract price and product data from competitors’ websites and then use pricing algorithms to instantaneously match price changes.

Sounds pretty great, right? After all, companies can now more readily maintain competitive prices, which should help them maintain their foothold in highly competitive markets. And consumers benefit, too. More real-time competition means lower prices. One may conclude these technological advancements in pricing pose no antitrust problem at all.

Not so fast. Instantaneous price-matching technology may actually decrease incentives for companies to lower prices, especially if they know their competitors (all of whom also likely use similar pricing software) will instantaneously match their price drops. If a company believes its price decreases will be matched, the competitive benefit to lowering prices could be significantly reduced. More troubling, however, is what may happen when one market participant increases its prices. Especially in markets characterized by more inelastic demand, price increases by one company may precipitate price increases by others, which could result in artificially inflated prices for sustained periods of time.

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Top 5 Antitrust Issues Facing Companies in the U.S. Today: #3 Pricing | The National Law Review.