March 28, 2023

Volume XIII, Number 87


March 27, 2023

Subscribe to Latest Legal News and Analysis

Consumer-Facing Algorithmic Pricing Cases

Go-To Guide:

  • Algorithmic pricing software cases on the rise

  • Consumer class actions allege hub and spoke conspiracies

Algorithmic pricing software in consumer-facing industries recently has generated a proliferation of class action lawsuits in the United States. Algorithmic pricing software relies on historic patterns and current data within a set market to make recommendations on pricing based on the end user’s preferences and goals. The cases filed allege competitors’ use of algorithmic pricing software in a given market violates Section 1 of the Sherman Act, claiming the competitors and software provider are engaged in a “hub and spoke” conspiracy to fix prices. Several cases have been filed, all of which are at the very early stages of litigation in federal courts around the United States.

Both EU and U.S. regulatory bodies have addressed algorithmic pricing models. The U.S. Federal Trade Commission and Department of Justice previously stated in a paper to the Organisation for Economic Co-operation and Development (OECD) that without an agreement with a competitor over the use or purpose of algorithmic pricing software, there can be no Section 1 violation. However, the agencies gave an example of an enforcement action against competitors that used algorithm-based pricing software with the express agreement to match prices. The agencies also noted:

If competing firms each entered into separate agreements with a single firm (for instance a platform) to use a particular pricing algorithm, and the evidence showed they did so with the common understanding that all of the other competitors would use the identical algorithm, that evidence could be used to prove an agreement among the competitors that violates U.S. antitrust law. The lack of direct communication among the competitors would not be a bar to finding an unlawful conspiracy.

In 2017, the European Union also provided the OECD with two general principles for the treatment of pricing algorithms under EU competition law:

First, if pricing practices are illegal when implemented offline, there is a strong chance that they will be illegal as well when implemented online. Second, firms involved in illegal pricing practices cannot avoid liability on the grounds that their prices were determined by algorithms. Like an employee or an outside consultant working under a firm’s “direction or control”, an algorithm remains under the firm’s control, and therefore the firm is liable for its actions.

The use of algorithmic pricing software is growing in both the United States and Europe across numerous industries. With the expansion of several plaintiff-oriented U.S. law firms in the UK and EU, industries in these regions may face suits similar to those filed in the United States.

Moreover, given the EU’s Representative Actions Directive (RAD), which set a deadline of Dec. 25, 2022, for EU member states to have a mechanism in place for representative actions to allow consumers to litigate their collective interests, and the fact that these regulations are now coming into effect, more collective actions related to the use of algorithmic pricing software may be filed in the future.

©2023 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XIII, Number 33

About this Author

Gregory Casas, Greenberg Traurig Law Firm, Austin, Houston, Energy and Business Litigation Law

Gregory J. Casas is the Administrative Shareholder for the Austin office and focuses his practice on antitrust, complex business litigation, and energy and natural resources law. Greg's antitrust and complex business litigation practices are international in scope. His antitrust practice includes litigating price-fixing, bid-rigging, and market allocation claims, and providing counseling for DOJ/FTC investigations, joint venture formation, mergers and acquisitions, pricing plans, and other contractual relationships. Greg's complex business litigation experience includes...

Emily Willis Collins Litigation Attorney Austin

Emily Willis Collins is an associate in the Litigation Practice in Greenberg Traurig’s Austin office. Emily focuses her practice primarily on general and commercial litigation, including antitrust and complex business litigation. Prior to joining the firm, she served as a law clerk to Judge David Godbey of the United States District Court for the Northern District of Texas. Before law school, Emily taught middle school social studies in the Rio Grande Valley with Teach For America.