ASCERTAINING THE INTER-RELATION OF PRICING ALGORITHMS AND COLLUSION: AN EXPLORATORY STUDY FROM THE PERSPECTIVES OF THE NOTION OF ‘CONSUMERISM’

Abstract

The technological revolution witnessed over the last two decades, has been rather remarkable. In the forefront of such innovations, remain the consumers, who form the backbone of any modern economy. However, such innovations have posed questions for the legal that has proven difficult to answer. The proposed piece shall attempt to examine one such resultant legal difficulties i.e., ‘algorithmic collusion’, one of the more concerning prospects, when viewed from the perspective of consumer protection.

To be succinctly put, algorithmic collusion refers to ‘any act of collusion or a situation where any collusive outcome has been achieved by resorting to the use of pricing algorithms’. In general parlance, agreements covered within § 3(3)(a) of the Competition requires intent to collude on behalf of the colluding parties. However, the use of pricing algorithms effectively allows parties to collude, without leaving any trace of intent or the pre-requisite mental element. Thus, the lack of evidentiary links and the fractured legal position concerning its invalidity, creates regulatory hurdles in establishing a causal link between the pricing algorithm and the resultant collusive outcomes. While the Government of India, through the Competition (Amendment) Act, 2023, has attempted to regulate certain facets of algorithmic collusion, the efficacy of the same within the practical context, still remains an uncharted territory.

On account of the above context, the present piece would attempt to evaluate three primary issues. Firstly, whether algorithmic collusion be regarded as a genuine threat to the functional competition within the market and consequently to the consumers. Secondly, whether there exists an emergent need to revisit the approaches prescribed under §3(3), to explore its plausible application to an instance of algorithmic collusion. Lastly, whether there is a need for exploring a revamped understanding of ‘consumer harm’, given the change in dynamics due to technological innovations.