Algorithms & Competition Law

This article considers how algorithms affect competition and what their implications are for competition policy. With the economy going digital a huge number of great innovations have materialized. Consumers have greatly benefitted from these innovations. However, a number of antitrust issues have emerged. This article looks at both the consumer benefits as well as the antitrust issues. It examines whether algorithmic innovations raise any novel concerns competition law concerns.

By Liza Lovdahl Gormsen¹

I. INTRODUCTION

What do algorithms have to do with antitrust? Nothing intrinsically, but algorithms feed of data and data is an issue for antitrust enforcers. The ability of a firm to collect extremely large amounts of data and process them through sophisticated algorithms to reveal patterns, trends and associations (collectively known as “big data”) adds a new dimension to market power, which ought to be of interests to competition authorities. Having a data advantage can lead to great innovations, but it can also create huge concentrations in certain markets. Data can affect entry conditions by making it more or less difficult for a firm to enter or compete, in particular for firms needing data as an input in order to compete in a specific market.  There is a belief that simple algorithms with lots of data outperform sophisticated algorithms with little data partly because of the opportunity for algorithms to learn through trial and error.² According