Document Type

Article

Publication Title

University of Tennessee Legal Studies Research Paper

Abstract

The antitrust risks associated with the use of the same hub’s pricing algorithm by many sellers are now well-accepted. 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. However, in this paper we argue differently and introduce the concept of secondary algorithmic tacit collusion, which leads to anticompetitive effects, independent of the conditions on the primary market. This phenomenon may lead to the evils of price-fixing but on far a wider scale. Contrary to traditional tacit collusion, this aggregated form of collusion, through the use of algorithmic hub-and-spoke structures, can occur in markets with many competitors and with seemingly competitive dynamics. We outline 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. Addressing its anticompetitive effects requires competition agencies to consider the interaction between price setters in the secondary markets, while taking note of the hub-and-spoke structures on the primary market.

Publication Date

2023

Comments

Forthcoming publication in the Vanderbilt Journal of Entertainment and Technology Law.

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