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Algorithmic Predation and Exclusion

Nowag, Julian LU and Cheng, Thomas K (2023) In University of Pennsylvania Journal of Business Law 2023(1). p.41-101
Abstract
The debate about the implications of algorithms on antitrust law
enforcement has so far focused on multi-firm conduct in general and
collusion in particular. The implications of algorithms on abuse of
dominance have been largely neglected. This article seeks to fill this gap in
the existing literature by exploring how the increasingly precise practice of
individualized targeting by algorithms can facilitate the practice of a range
of abuses of dominance, including predatory pricing, rebates, and tying and
bundling. The ability to target disparate groups of consumers with different
prices helps a predator to minimize the losses it sustains during predation
and maximize its ability to recoup its losses.... (More)
The debate about the implications of algorithms on antitrust law
enforcement has so far focused on multi-firm conduct in general and
collusion in particular. The implications of algorithms on abuse of
dominance have been largely neglected. This article seeks to fill this gap in
the existing literature by exploring how the increasingly precise practice of
individualized targeting by algorithms can facilitate the practice of a range
of abuses of dominance, including predatory pricing, rebates, and tying and
bundling. The ability to target disparate groups of consumers with different
prices helps a predator to minimize the losses it sustains during predation
and maximize its ability to recoup its losses. This changes how recoupment
should be understood and ascertained and may even undermine the rationale
for requiring a proof of likelihood of recoupment under U.S. antitrust law.
This increased ability to price discriminate also enhances a dominant firm’s
ability to offer exclusionary rebates. Finally, algorithms allow dominant
firms to target their tying and bundling practices to loyal customers, hence
avoiding the risk of alienating marginal customers with an unwelcome tie. This renders tying and bundling more feasible and effective for dominant
firms. (Less)
Please use this url to cite or link to this publication:
author
and
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Antitrust, Predation, Abuses of dominance, Algorithms, Business law, Affärsrätt, Algoritmer
in
University of Pennsylvania Journal of Business Law
volume
2023
issue
1
pages
41 pages
ISSN
1945-2934
language
English
LU publication?
yes
id
d940f1ac-0f94-4842-b054-f42092a2487b
date added to LUP
2023-03-04 17:32:48
date last changed
2023-03-06 15:33:42
@article{d940f1ac-0f94-4842-b054-f42092a2487b,
  abstract     = {{The debate about the implications of algorithms on antitrust law<br/>enforcement has so far focused on multi-firm conduct in general and<br/>collusion in particular. The implications of algorithms on abuse of<br/>dominance have been largely neglected. This article seeks to fill this gap in<br/>the existing literature by exploring how the increasingly precise practice of<br/>individualized targeting by algorithms can facilitate the practice of a range<br/>of abuses of dominance, including predatory pricing, rebates, and tying and<br/>bundling. The ability to target disparate groups of consumers with different<br/>prices helps a predator to minimize the losses it sustains during predation<br/>and maximize its ability to recoup its losses. This changes how recoupment<br/>should be understood and ascertained and may even undermine the rationale<br/>for requiring a proof of likelihood of recoupment under U.S. antitrust law.<br/>This increased ability to price discriminate also enhances a dominant firm’s<br/>ability to offer exclusionary rebates. Finally, algorithms allow dominant<br/>firms to target their tying and bundling practices to loyal customers, hence<br/>avoiding the risk of alienating marginal customers with an unwelcome tie. This renders tying and bundling more feasible and effective for dominant<br/>firms.}},
  author       = {{Nowag, Julian and Cheng, Thomas K}},
  issn         = {{1945-2934}},
  keywords     = {{Antitrust; Predation; Abuses of dominance; Algorithms; Business law; Affärsrätt; Algoritmer}},
  language     = {{eng}},
  number       = {{1}},
  pages        = {{41--101}},
  series       = {{University of Pennsylvania Journal of Business Law}},
  title        = {{Algorithmic Predation and Exclusion}},
  url          = {{https://lup.lub.lu.se/search/files/139685414/Algorithmic_Predation_and_Exclusion.pdf}},
  volume       = {{2023}},
  year         = {{2023}},
}