Antitrust and Algorithms: Congress Wades into the Debate

Last week, the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights held a hearing on algorithms and their impact on competition and consumer rights. Businesses that use algorithms or machine learning for price setting should pay close attention to lawmakers and their growing interest in the way businesses might use algorithms to disadvantage consumers. The Biden administration, along with states attorneys general, have started confronting businesses for their use of algorithms, alleging that businesses use algorithms to skirt consumer protection laws and to engage in anticompetitive conduct. Lawmakers on both sides of the aisle, led by Chair Amy Klobuchar (D-MN) and Ranking Member Mike Lee (R-UT), used the hearing to focus on recent developments in these cases and to discuss potential legislative solutions to curb what they described as the harms that algorithms can cause to consumers. The panel heard from a range of antitrust and technology experts, including: Roger Alford, professor of law, University of Notre Dame Law School; Sarah Myers West, managing director, AI Now Institute; Robert Epstein, senior research psychologist, American Institute for Behavioral Research; Damon Hewitt, president and executive director, Lawyers’ Committee for Civil Rights Under Law; and Bill Baer, visiting fellow in governance studies, The Brookings Institution.

Ongoing Lawsuits

Chair Klobuchar highlighted the ongoing lawsuit brought by the Washington, D.C., attorney general and separate suits brought by renters across the country, accusing the tech company RealPage of using algorithms in an anticompetitive way to recommend rents to landlords to maximize profits. She described how landlords delegate their pricing decisions to the algorithm, rather than using human decision-making, to avoid existing antitrust laws prohibiting price-fixing. Baer added that third-party vendors provide landlords with sensitive pricing data, allowing landlords to charge higher rents for individual units. Myers West stated that some personalized pricing algorithms are designed to extract as much money as possible from consumers without improving products and services. Alford pointed to the work of the Federal Trade Commission (FTC) and its recent complaint against Amazon as a sign that antitrust enforcement agencies are taking anticompetitive use of algorithms seriously.

Algorithmic Discrimination and Manipulation

Ranking Member Lee said algorithms could be used to perpetuate biases and could dilute product quality. Hewitt told lawmakers that algorithms are frequently used in discriminatory ways, pointing to the auto insurance industry and its use of algorithms resulting in majority-Black neighborhoods paying higher rates and fewer options. He added that mortgage approval algorithms are more likely to reject Black applicants. He called on Congress to include an anti-discrimination provision in its algorithmic safety legislation, along with data protection requirements to limit the potential of personal data being used to discriminate. Epstein suggested that certain Big Tech companies use algorithmically generated content to influence elections and to recommend harmful content to children. He cautioned that algorithms will be difficult to regulate as they are inherently opaque, making them difficult for regulators to fully understand. These statements are in line with activity at the state level. For example, a bill was recently prefiled in Washington state designed to address algorithmic discrimination by, among other things, requiring deployers of AI tools to complete and document annual impact assessments. Notably, the state attorney general would have the ability to enforce this bill.

Next Steps

While progress on expansive antitrust legislation has stalled, the novel questions raised by how algorithms interact with antitrust law may stir renewed interest in Congress to pass legislation. Pricing algorithms and machine learning are increasingly changing the competitive landscape in digital markets, and they are challenging traditional antitrust enforcement. Congress will keep investigating how businesses use algorithms and what changes may be necessary to address consumer protection concerns. The Brownstein policy team will continue tracking developments in this rapidly changing policy area.

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