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The Role of Secondary Algorithmic Tacit Collusion in Achieving Market Alignment

Posted by on Monday, May 6, 2024 in Articles, Volume 26, Volume 26, Issue 3.

Ariel Ezrachi & Maurice E. Stucke | 26 Vand. J. Ent. & Tech. L. 461 (2024)

Antitrust enforcers now recognize the risks associated with many sellers’ use of a singular hub’s pricing algorithm. But what if many rivals use several different hubs for dynamic pricing? The common assumption is that in such instances, competition among the pricing hubs would support competition among the sellers. This Article, however, argues differently and instead introduces the concept of secondary algorithmic tacit collusion, which leads to anticompetitive effects independent of primary market conditions. This phenomenon may lead to the evils of price fixing but on a far wider scale. Contrary to traditional tacit collusion, this aggregated form of collusion—via algorithmic hub-and-spoke structures—can occur in markets with many competitors and with seemingly competitive dynamics. This Article outlines how the combination of hub-and-spoke frameworks on the primary market and conscious parallelism on the secondary market for algorithmic pricing services can lead to secondary tacit collusion, and what the agencies and courts can do to prevent this harm.

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