SSRN Id4469586

ALGORITHMS, AI, AND MERGERS
Michal S. Gal and Daniel L. Rubinfeld*
Forthcoming, Antitrust Law Journal
ABSTRACT
Algorithms, especially those based on artificial intelligence, play

an increasingly important role in our economy. They are used by market
participants to make pricing, output, quality, and inventory decisions;
to predict market entry, expansion, and exit; and to predict regulatory
moves. In a growing number of jurisdictions, algorithms are also used
by regulators to detect and analyze anti-competitive conduct. This
game-changing switch to (semi-)automated decision-making has the
potential to reshape market dynamics. While the effect of algorithms on
coordination between competitors has been a focus of attention, and
scholarly work on their effects on unilateral conduct is beginning to ac-
cumulate, merger control issues have been undertreated. Accordingly,
this article focuses on such issues.
The article identifies six main functions of algorithms that may af-
fect market dynamics: collection and ordering of data; improving the
ability to use existing data; reducing the need for data, for instance by
generating synthetic data; monitoring; predicting, to determine how dif-
ferent types of conduct, including mergers, are likely to affect market
conditions; and decision-making.
The article demonstrates how such algorithms can exacerbate anti-
competitive conduct with respect to both unilateral and coordinated ef-
fects. Towards this end, seven scenarios are explored: collusion, oligop-
olistic coordination, high unilateral prices, price discrimination,
predation, selective pricing (in which a buyer offers a higher price to
some suppliers in an aggressive bid for an input), and reducing the in-
teroperability of datasets. For each scenario, we analyze how the market
conditions necessary for such conduct are affected by algorithms.
These findings are then translated into merger policy. Algorithms
are shown to affect substantive as well as institutional features of mer-
ger control. Algorithms also challenge some of the assumptions that are
Michal S. Gal is Professor and Director of the Center of Law and Technology, University of
Haifa Faculty of Law, and the President of the International Association of Competition Law
Scholars (ASCOLA). Daniel Rubinfeld is Professor of Law, NYU and Robert L. Bridges Pro-
fessor of Law and Professor of Economics Emeritus, U.C. Berkeley. Many thanks to Adi Ayal,
Doug Melamed, Thibault Schrepel and the two anonymous reviewers for superb comments,
and to Sven Botthäuser, Ido Castel, and Omer Tshuva for excellent research assistance. This
work was supported by NYU School of Law research assistance funds, as well as the Israel
Science Foundation (grant no. 2737/20). Any mistakes or omissions remain the authors’.
2 Algorithms. AI and Merger Control
ingrained in merger control, suggesting that a more informed approach

to some algorithmic-related mergers is appropriate.
TABLE OF CONTENTS
ABSTRACT ............................................................................................ 1
I. INTRODUCTION.................................................................................. 2
II. A PRIMER ON ALGORITHMS ............................................................. 5
III. ALGORITHMS AND COORDINATED CONDUCT ............................ 10
1. Effects of Algorithms on Coordination .................................... 11
2. Implications for Merger Review .............................................. 17
IV. ALGORITHMS AND UNILATERAL CONDUCT ................................. 24
1. Algorithms and Market Power ................................................. 24
2. Algorithms and Unilateral Conduct ........................................ 25
A. High Prices ........................................................................ 25
B. Price Discrimination ............................................................ 26
C. Predation.............................................................................. 28
D. Supra-Competitive Selective Pricing ................................... 31
E. Exclusion by Limiting Interoperability .............................. 32
3. Implications for Merger Review ................................................. 33
V. INSTITUTIONAL RECOMMENDATIONS ........................................... 45
V. CONCLUSION .................................................................................. 48
I. INTRODUCTION
Algorithms, especially those based on artificial intelligence (AI),

play an increasingly important role in many markets. They bring cost
savings, speed, precision, and sophistication to decision-making and
planning processes, improving both day-to-day decisions and long-
term innovation, strategy, and vision.1 As a result, a growing number
of market players employ algorithms for a variety of tasks, from setting
price, output, and inventory levels, to predicting market dynamics and
regulatory moves.2 New AI technologies, including Large Language
Models such as ChatGPT, are posed to accelerate this trend. In a grow-
ing number of jurisdictions, algorithms are also used by regulators to
1
ORG. FOR ECON. CO-OPERATION & DEV. (OECD), Algorithms and Collusion: Competition
Policy in the Digital Age 817 (Sept. 14, 2017), https://www.oecd.org/competition/algorithms-
collusion-competition-policy-in-the-digital-age.htm ("OECD, Collusion"); Michal S. Gal, Al-
gorithms as Illegal Agreements, 34 BERKELEY TECH. L. J. 67 (2019).
2
See Part II infra.
2023 3
detect and analyze anti-competitive conduct.3 This game-changing

switch to (semi-)automated decision-making by robo-economicus is re-
shaping modern-day competitive dynamics.
While the use of algorithms can undoubtedly generate significant
pro-competitive benefits, this is not always the case, including when
mergers and acquisitions are involved. Yet to date, the effects of algo-
rithms on merger policy have been undertreated, both in the academic
literature4 and in merger policy.5 Furthermore, while some scholars
have acknowledged the role that algorithms play in merger policy, most
studies relate only to algorithmic coordination.6 Given recent learnings
on the myriad ways that algorithms affect unilateral and coordinated
anti-competitive conduct,7 a more informed approach to mergers that
involve algorithms should be adopted.
This article seeks to systematically analyze the effects of algo-
rithms on merger control, focusing mainly on their use by market play-
ers. To do so, we first explore the potential effects of algorithms -
especially those powered by AI - on both unilateral and multilateral
market power. The analysis comprises both the stand-alone and cumu-
lative effects of the different types of welfare-reducing conduct, that
have become easier to engage in due to the use of algorithms. We then
translate these effects into merger policy.
To do so, we first identify six main functions of algorithms that
may affect market dynamics and merger control: (1) collecting and or-
dering of data; (2) improving the ability to use existing data; (3) reduc-
ing the need for data, for instance by generating synthetic data; (4)
monitoring; (5) predicting outcomes to help firms – and regulators – to
determine how different types of conduct are likely to affect market
conditions; and (6) making decisions, for example determining trade
terms (e.g., price, quantity, and inventory levels), product/service vari-
ables (e.g., ranking, recommendation, content) and/or strategic deci-
sions (e.g., whether to acquire a particular firm).
3
The British Competition and Markets Authority ("CMA"), for example, uses algorithms for
different regulatory tasks. COMPETITION AND MARKETS AUTHORITY, ALGORITHMS: HOW
THEY CAN REDUCE COMPETITION AND HARM CONSUMERS 35-41 (2021),
https://www.gov.uk/government/publications/algorithms-how-they-can-reduce-competition-
and-harm-consumers/algorithms-how-they-can-reduce-competition-and-harm-conwhsumers.
4
For some exceptions, most focusing on one type of conduct, see the articles and cases cited
in Parts II and III infra.
5
Egerton-Doyle and Ford point to one exceptional case in the EU, Microsoft/LinkedIn 2016,
where the remedy required interoperability of the parties’ algorithms as a condition of the
merger. Verity Egerton-Doyle & Jonathan Ford, Algorithms, Big Data, and Merger Control,
in ALGORITHMIC ANTITRUST 87 (Aurelien Portuese, ed., 2022).
6
See, e.g., Michael Coutts, Mergers, Acquisitions and Algorithms in an Algorithmic Pricing
World, J. OF COM. L. & ECON. (2022); Michal S. Gal, Limiting Algorithmic Coordination,
BERKELEY TECH. L. J. (forthcoming, 2023).
7
See Parts II and III infra.
We then set the stage for merger analysis by pointing to the poten-
tial effects of algorithms on consumer welfare. We show that, while
algorithms offer many benefits that may increase both firms' and con-
sumers' welfare, they may also exacerbate anti-competitive conduct.
Towards this end, seven scenarios are explored: collusion, conscious
parallelism, high unilateral prices, price discrimination, predation, se-
lective pricing, and reduced interoperability.8 In each scenario we ana-
lyze how the market conditions necessary for such conduct are affected
by algorithms. We also offer examples, both real and theoretical, to
show that algorithms may not only increase a firm's market power, but
also amplify its ability to create and enjoy the benefits of such power.
These findings are then translated into merger policy, which must bal-
ance the benefits of algorithms with their potentially harmful effects.
Trends in the U.S. economy over the past decade suggest that
stronger, more aggressive merger review is necessary, especially with
respect to markets involving digital technology. Indeed, leading schol-
ars, including Nancy Rose, Carl Shapiro, Joe Farrell, and Jonathan
Baker, have argued that merger enforcement should be tightened.9 In
line with these scholars, we argue that enforcement agencies should also
take a hard look at the effects of AI and algorithms in the merger con-
text.
Given that the effects of algorithms on market dynamics are still
being studied, it is too early to make across-the-board recommenda-
tions. Nonetheless, the time is ripe for antitrust authorities to utilize
merger control tools that are sensitive to the effects of algorithms. With
respect to policy, we suggest changes relating to substantive and insti-
tutional features of merger control.
The article proceeds as follows: Part II briefly describes different
roles algorithms play in the marketplace. Parts III and IV analyze the
competitive concerns raised by the use of algorithms on unilateral and
coordinated conduct, respectively. We also suggest how these concerns
should affect merger policy. Part V analyzes the use of AI by merger
regulators. Part VI concludes.
8
Other scenarios are also possible. For example, algorithms can strengthen the ability to mon-
itor resale price maintenance, or to manipulate consumers' choices. CMA, supra note 3.
9
Nancy L. Rose & Carl Shapiro, What Next for the Horizontal Merger Guidelines?
ANTITRUST (Spring 2022); Jonathan B. Baker & Joseph Farrell, Oligopoly Coordination, Eco-
nomic Analysis, and the Prophylactic Role of Horizontal Merger Enforcement, 168 PENN. L.
REV. 1985 (2020).
2023 5
II. A PRIMER ON ALGORITHMS
The digital revolution has brought with it increasingly intensive use

of algorithms in the commercial world.10 Frequent use of algorithms to
set price, for example, is reported in sectors as varied as online retail,11
tourism and hospitality,12 and petrol stations.13
Algorithms are structured decision-making processes that employ
a set of rules or procedures that automatically produce outputs based on
data inputs and decisional parameters.14 The inputted data can relate to
a variety of parameters, such as costs, perishability, and storage capac-
ity. The algorithm applies a set of decision tools to the data, such as
predictive analytics and optimization, and can be programmed to max-
imize any variable.15
Algorithms operate at different levels of abstraction.16 At the low-
est level, all parameters and optimal responses to specific contingencies
are dictated by the developer in advance (“expert algorithms”).17 At the
highest level, algorithms autonomously set or refine their decision pa-
rameters in accordance with inputted data and the decision-making
techniques they were coded to perform (“learning algorithms”).18
Learning algorithms employ machine learning—a type of AI that gives
computers the ability to learn from data inputs without the need to de-
fine correlations a priori.19 To illustrate, reinforcement learning algo-
rithms devise and test different actions, taking into account the
feedback from previous rounds.
Algorithms create significant advantages: by speeding the collec-
tion, organization, and analysis of data, they enable exponentially
10
For a review of uses of pricing algorithms see, e.g., Peter Seele et al., Mapping the Ethicality
of Algorithmic Pricing: A Review of Dynamic and Personalized Pricing, 170 J BUS.
ETHICS 697 (2021). See also OECD, Algorithmic Competition 10 (draft, April 2023)
11
Id.
12
Arnoud V. den Boer, Dynamic Pricing and Learning: Historical Origins, Current Research,
and New Directions, 20 SURVEYS IN OPERATIONS RESEARCH AND MANAGEMENT SCI. 1
(2015); Elena Donini, Collusion and Antitrust: The Dark Side of Pricing Algorithms 51
(2019), https://www.associazioneantitrustitaliana.it/wp-content/uploads/2020/10/Tesi-Elena-
Donini.pdf; Andrea Guizzardi, Flavio Maria Emanuele Pons & Ercolino Ranieri, Advance
Booking and Hotel Price Variability Online: Any Opportunity for Business Customers?, 64
INT'L J. OF HOSPITALITY MANAGEMENT 85 (2017).
13
Stephanie Assad et al., Autonomous Algorithmic Collusion: Economic Research and Policy
Implications, 37 OXFORD REV. OF ECON. POL'Y 459 (2021).
14
See, e.g., THOMAS H. CORMEN ET AL., INTRODUCTION TO ALGORITHMS 5 (3rd ed. 2009).
This section builds upon Gal, Coordination, supra note 6.
15
See id., at 5, 192–93, 843–49 (3rd ed. 2009). The following four paragraphs build on Gal,
Coordination, supra note 6Error! Bookmark not defined..
16
Gal, Illegal Agreements, supra note 1, at 84–87.
17
See OECD, COLLUSION, supra note 1, at 11–12.
18
Id, at 9–11.
19
See generally TOM MITCHELL, MACHINE LEARNING (1997).
quicker decisions and reactions to changing conditions;20 by automat-

ing processes and potentially taking the human decision-maker, fully
or partially, out of the loop, they save resources; by enabling complex
multi-vectored analysis, they offer analytical sophistication, making it
easier to extract information from data. This, in turn, enables them to
better predict likely reactions to changes in market conditions or the
optimal equilibrium in a dynamic environment, thereby better achiev-
ing users' desired objectives by known or by new strategies.21
Algorithms are within reach of firms of all sizes, in all industries.
Often, firms can create their own tailored algorithms at a reasonable
cost based on freely available complex algorithms. Alternatively, they
can rely on sophisticated algorithms operated or supplied by third par-
ties.22 Interestingly, some AI algorithms can autonomously create other
AI algorithms,23 and ChatGPT can write some quite efficient algo-
rithms by itself.24
Recent changes in the digital ecosystem have made algorithms both
cheaper and more efficient than ever before. In particular, data on mar-
ket conditions (including reactions of consumers and competitors to
different trade terms) is more accessible than ever before, due to the
move of many industries to online commerce, coupled with the high
speed and low costs of internet connectivity, computing power, and
data storage. This, in turn, has increased algorithmic performance. For
AI-based algorithms, for example, data come into play twice. First, data
are used at the training stage, in which the algorithm learns how to op-
timize based on its objectives, such as maximizing the firm’s short-term
or long-term profits, or increasing sales.25 Real-time data are then used
by the algorithm in a second stage, to make decisions based on previous
learning. As a result, the availability of data drastically improved the
complexity and sophistication of algorithms, enabling them to aid in
more complex environments and perform many more tasks.26
20
See, e.g., OECD, COLLUSION, supra note 1, at 14-6.
21
See, e.g., Matthew Adam Bruckner, The Promise and Perils of Algorithmic Lenders’ Use
of Big Data, 93 CHI.-KENT L. REV. 3 (2018); Ulrich Schwalbe, Algorithms, Machine Learn-
ing, and Collusion, 14 J. COMPETITION L. & ECON. 568, 591 (2018).
22
Assad et al., supra note 13, at 42.
23
Tom Simonite, AI Software Learns to Make AI Software, MIT TECH. REV., Jan. 18, 2017.
24
See, e.g., Umer Abdullah, Chat GPT can write code- here's why that's significant, PC GUIDE,
Mar. 3, 2023, https://www.pcguide.com/apps/chat-gpt-can-write-code/.
25
Ai Deng & Cristian Hernandez, Algorithmic Pricing in Horizontal Merger Review: An Ini-
tial Assessment, 36(2) ANTITRUST 36-37 (2022).
26
Compare, for example, the OECD Report from 2017 (OECD, COLLUSION, supra note 1),
to the effects noted in this article infra.
2023 7
Algorithms of all kinds can be used by firms to perform a myriad

of internal tasks and functions. We focus on six, that sometimes over-
lap.27 The first four relate to data. The first involves algorithms that col-
lect and organize data. Such algorithms can also filter useless data.
The second improves the use of existing data, for instance by “clean-
ing” the data to make it useful, or by increasing interoperability between
datasets. The third function is reducing the amount of needed data.
This group includes algorithms that are more efficient, allowing them
to make more precise deductions from a given dataset; algorithms able
to generate synthetic data, which can be used, inter alia, for training;28
or algorithms that incorporate previous learnings (mature algorithms),
thereby reducing the need for training data. Algorithms in the fourth
group engage in monitoring and mapping of different market condi-
tions. 29 For example, European manufacturers of consumer electronics
were found to use algorithms to monitor compliance with their resale
price maintenance policies.30 All four types serve to reduce access bar-
riers to data for their owners.
Algorithms in the fifth group predict how different conditions are
likely to affect a given parameter (such as profitability).31 The compar-
ative advantage of such algorithms over human actions arises from the
fact that algorithms can better detect correlations between different var-
iables, especially in complex environments; and they can more quickly
weigh the probability that various scenarios will arise. Predictive algo-
27
These functions are distinguished from algorithmic-powered products or services for con-
sumers (e.g., search services), although the two sometimes overlap. Other functions may also
exist. For example, Google Brain has trained algorithms to autonomously encrypt messages.
Martin Abadi & David G. Anderson, Learning To Protect Communications with Adversarial
Neural Cryptography (2016) (unpublished manuscript),
https://arxiv.org/pdf/1610.06918v1.pdf.
28
Michal S. Gal & Orla Lynskey, Synthetic Data: The Legal Implications of a Data Genera-
tion Revolution, IOWA L. REV (2023); Ilia Sucholutsky & Matthias Schonlau, Less Than One’-
Shot Learning: Learning N Classes From M<N Samples, 35(11) Proceedings of the AAAI
Conference on Artificial Intelligence 9739-46 (2021), arXiv:2009.08449v1 (showing that
some deep learning networks can learn N new classes given only M<N examples).
29
See, e.g., Sheng Li, Claire Chunying Xie & Claire Feyler, Algorithms & Antitrust: An Over-
view of EU and National Case Law, 102334 CONCURRENCES 3 (2021); Deng & Hernandez,
supra note 25, at 38; Julien Debussche et al., Leveraging Big Data for Managing Transport
Operations - Report on Legal Issues 270 (2018),
https://static1.squarespace.com/static/59f9cdc2692ebebde4c43010/t/5bdab3e2cd8366e9378d
02b1/1541059569380/D2.2_Report+on+Legal+Issues_LeMO+-+FINAL.pdf.
30
European Commission, Case AT.40465 – ASUS, July 24, 2018, https://ec.europa.eu/com-
petition/antitrust/cases/dec_docs/40465/40465_337_3.pdf. In the British Priceline/Kayak
merger review, Priceline submitted that it used an automated system for parity checks to en-
force its parity price agreements. Office of Fair Trading, ME/5882-12, Anticipated acquisition
by Priceline.Com Incorporated of Kayak Software Corporation, May 9, 2013, https://as-
sets.publishing.service.gov.uk/media/555de2b6e5274a7084000024/priceline.pdf, recital 83.
31
OECD, COLLUSION, supra note 1, at 11.
rithms can be used, inter alia, for determining efficient levels and loca-
tions of production and storage; for predicting the response of the mar-
ket or a sub-set thereof, to different price levels or to a merger with a
specific firm; or for assessing risk levels.32 Given sufficient data, algo-
rithms can also make it easier to differentiate between different sub-
groups, whether actual or potential suppliers, consumers, or competi-
tors, based on characteristics such as their cost and demand elasticities.
Such algorithms enable firms to more efficiently plan their business
strategies and to develop innovative and customized services that would
not be possible otherwise.33 Predictive algorithms can also be used by
competition authorities to determine the competitive effects of mer-
gers.34
The final group is decision-making algorithms, which can be
used, inter alia, for setting trade terms, such as price, quality, and ser-
vice levels, or for setting product/service variables, such as ranking,
content, and quality. Such algorithms can be expert algorithms, based
on a predetermined set of factors (such as the price of a certain input)
with given weights set by the coder. For instance, in a follow-the-leader
price scheme, an algorithm can be programmed to base the price of a
good on that set by a rival; or in cost-plus pricing, an algorithm can be
programmed to base the price on the producer's costs plus a predeter-
mined profit. Alternatively, AI algorithms can autonomously determine
trade terms based on learnings from market actions and reactions. De-
cision-making algorithms can be used to make internal decisions, or
they may be part of consumer-facing goods and services, such as search
services. The main advantages of such algorithms are the speed at
which they react, their sophistication, and the reduction in costs, espe-
cially if they are programmed to automatically execute their decisions.
Firms can employ any combination of the six types of algorithms,
depending on their needs. This range of uses also exemplifies the fact
that there is no one-type-fits-all algorithm. Rather, different types of
algorithms are needed to perform different tasks. Moreover, the same
task can be performed by completely different algorithms (e.g., expert
vs. learning; type of machine learning employed, etc.). Generally, the
more complex the task, and the more important and rapid the feedback,
the better AI-powered algorithms are suited to the task, compared to
expert algorithms.
Employing algorithms requires three main resources: relevant data,
the algorithm itself, and necessary infrastructure (such as computing
32
Id.
33
Id.
34
See sub-section IV.B infra.
2023 9
power).35 Of the three, data advantages play the most important role in
the competitive dynamics of digital markets.36 This is because data are
almost universally the raw material for the generation of information
and knowledge, which in turn enables better-informed decisions.37 In
particular, the growth in machine learning applications, especially data-
hungry deep learning techniques, is pushing the boundaries beyond
what is economically feasible and physically possible.38 In such a set-
ting, data-based advantages may not only strengthen a firm's market
power, but also make it more durable.39
Yet while data-based advantages are most useful, any of the three
resources may serve as a source of comparative advantage. In the con-
text of mergers, this means that acquiring a firm with better access to
any of these resources could create comparative advantages of a sort
not easily obtained through regular market channels.40 For example,
mergers might allow firms to benefit from synergies (e.g., applying
more efficient algorithms developed by one firm to the dataset of the
other). Alternatively, mergers can generate comparative advantages by
blocking competitors’ access to necessary resources.41 For example,
Egerton-Doyle and Ford explore the potential for a merged entity to use
35
See, e.g., Jeremy Khan, Deep Learning Pioneer Andrew Ng Says Companies Should Get
‘Data-Centric’ to Achieve A.I. Success, FORTUNE, June 21, 2022, https://for-
tune.com/2022/06/21/andrew-ng-data-centric-ai/. The centrality of data to automated deci-
sion-making is also recognized in law and ethics literature. See, e.g., Solon Barocas & Andrew
D. Selbst, Big Data's Disparate Impact, 104 CAL. L. REV. 671, 673-4 (2016); David Lehr &
Paul Ohm, Playing with the Data: What Legal Scholars Should Learn About Machine Learn-
ing, 51 U.C. DAVIS L. REV. 653, 664 (2017); Brent Daniel Mittelstadt et al., The Ethics of
Algorithms: Mapping the Debate, 3(2) BIG DATA & SOCIETY 1 (2016).
36
See, e.g., OECD, DATA-DRIVEN INNOVATION: BIG DATA FOR GROWTH AND WELL-BEING
(2015), at 391–9; JACQUES CRÉMER, YVES-ALEXANDRE DE MONTJOYE & HEIKE
SCHWEITZER, EUROPEAN COMM’N—COMPETITION, COMPETITION POLICY FOR THE DIGITAL
ERA 73 (2019), http://ec.europa.eu/competition/publications/reports/kd0419345enn.pdf.
37
Of course, this is not always the case. SERGEY I. NIKOLENKO, SYNTHETIC DATA FOR DEEP
LEARNING 10 (2021).
38
Id., at 1.
39
See, e.g., STIGLER CTR. FOR THE STUDY OF THE ECON. & THE STATE, STIGLER COMM. ON
DIGIT. PLATFORMS: FINAL REPORT 40 (2019), https://www.chicagobooth.edu/-/media/re-
search/stigler/pdfs/digital-platforms---committee-report---stigler-center.pdf.
40
Of course, not every merger involving the acquisition of algorithms or datasets will harm
competition. To illustrate, consider the Amazon/Eero merger, which was approved in 2019.
Eero is a mesh networking /wifi company. By applying machine learning to data collected
from thousands of homes, it was able to optimize its routing algorithms to ensure maximum
network coverage. The purchase was part of Amazon’s strategy to offer “frustration-free
setup” for smart home devices. Yet since the router market accommodates quite a few relevant
competitors, Eero’s dataset is not unique, despite the fact that it involved hundreds of millions
of data points.
41
See, e.g., the European Commission’s decision in the TomTom/TeleAtlas merger, which
gave TomTom direct access to TeleAtlas’s map database. The Commission found that the
merged entity would have no incentive to engage in input foreclosure. European Commission,
COMP/M 4854, TomTom/Tele Atlas, May 14, 2008, https://ec.europa.eu/competition/mer-
gers/cases/decisions/m4854_20080514_20682_en.pdf, recitals 211-230.
its algorithm to technologically restrict access of rivals to a unique da-

taset.42 Merging with a firm owning a unique algorithm might achieve
a similar result.
The effects of access to these resources on merger review have al-
ready been recognized. In particular, attention has been paid to the role
of better data in creating better products and services (hereinafter to-
gether “products”), and to the externalities imposed by such compara-
tive advantages on rivals and consumers.43 Yet, with the exception of
killer acquisitions,44 studies of merger policy have yet to incorporate
the wide range of algorithmic-facilitated conduct that can harm as well
as improve consumer welfare.
In the rest of this paper, the term “algorithms” will be used to indi-
cate the availability of all three resources (data, the algorithm itself, and
essential infrastructure). When possible, we will focus particular atten-
tion on AI-powered algorithms.
III. ALGORITHMS AND COORDINATED CONDUCT
Algorithms can facilitate anti-competitive conduct in various ways.

In what follows, we explore seven scenarios that capture the core types
of conduct regulated by merger policy. For each scenario we examine
the necessary economic conditions for the conduct to take place; how
algorithms affect such conditions; whether other regulatory tools can
deal effectively with such effects; and the role of merger policy in lim-
iting such conduct. This Part focuses on coordinated effects, and the
next (Part IV) on unilateral conduct.
42
Egerton-Doyle & Ford, supra note 5.
43
See, e.g., Anca D. Chirita, Data-Driven Mergers Under EU Competition Law, in THE
FUTURE OF COMMERCIAL LAW: WAYS FORWARD FOR HARMONISATION, 147 (J. Linarelli &
O. Akseli eds., 2019); Jörg Hoffmann and Germán Oscar Johannsen, EU-Merger Control &
Big Data: On Data-specific Theories of Harm and Remedies, in EU COMPETITION LAW
REMEDIES IN THE DATA ECONOMY (Marco Botta & Josef Drexl eds., 2019); Charles A. Miller,
Big Data and the Non-Horizontal Merger Guidelines, 107 CAL. L. REV. 309 (2019)(data-
driven merges can enhance the network effects of specific firms, and influence the switching
cost imposed on customers).
44
Coleen Cunningham, Florian Ederer & Song Ma, Killer Acquisitions, 129 J. OF POL. ECON.
(2021) (acquisitions in which a firm buys a unique and efficient algorithm in order to "kill"
the innovation rather than use it); SUBCOMMITTEE ON ANTITRUST, COMMERCIAL AND
ADMINISTRATIVE LAW OF THE COMMITTEE ON THE JUDICIARY, INVESTIGATION OF
COMPETITION IN DIGITAL MARKETS: MAJORITY STAFF REPORTS AND RECOMMENDATIONS
343, July 2, 2022, https://www.govinfo.gov/content/pkg/CPRT-117HPRT47832/pdf/CPRT-
117HPRT47832.pdf.
2023 11
1. Effects of Algorithms on Coordination
Coordination between competitors is a primary concern of merger

policy. This is not surprising, given that in some markets, merger re-
view is typically the last opportunity to intervene before conscious par-
allelism emerges. While coordinated effects were the primary focus of
merger enforcement before the 1990s, more recently they have taken a
back seat to unilateral effects.45 This has led some scholars to call for a
revival of enforcement against coordination.46
The Nobel laureate economist George Stigler famously identified
three cumulative conditions necessary for coordination to take place.47
First, an understanding between the parties to the agreement on what
trade conditions (e.g., price or quality) will be profitable for all con-
cerned. In economic parlance, this condition captures both explicit
agreements and conscious parallelism (sometimes called oligopolistic
coordination or tacit collusion).48 The former refers to cases where the
parties exchange mutual assurances that they will act in a coordinated
manner.49 The latter occurs when firms independently set their trade
terms while taking into account their competitors’ probable reactions
to their actions.50 The second condition is detection of deviations from
the supra-competitive equilibrium. The slower and less completely de-
viations are detected, the stronger the incentive to cheat and the less
stable the agreement. The third is creating a credible threat of retalia-
tion, to discourage deviations.
Some market conditions can make coordination more likely, espe-
cially in repeated interactions.51 The economics literature identifies five
categories of variables that affect Stigler’s conditions: (1) market struc-
ture variables (e.g., high entry barriers52), (2) product variables (e.g.,
product and cost homogeneity), (3) sales variables (e.g., secrecy), (4)
demand variables (e.g., demand fluctuations, difficulties in estimating
45
D. Daniel Sokol & Sean P. Sullivan, The Decline of Coordinated Effects Enforcement and
How to Reverse It (unpublished manuscript, 2023), part II.B. Yet since then there has been a
significant decline of coordinated effects enforcement. Id., criticizing the current trend.
46
Id; Baker & Farrell, supra note 9.
47
George J. Stigler, Theory of Oligopoly, 72 J. POLITICAL ECON. 44, 44–46 (1964). The next
three paragraphs build on Gal, Illegal Agreements, supra note 1.
48
See, e.g., William H. Page, Tacit Agreement Under Section 1 of the Sherman Act, 81
ANTITRUST L.J. 593, 593–94 (2017).
49
Id. at 619.
50
Id. at 601.
51
See, e.g., Gregory J. Werden, Economic Evidence on the Existence of Collusion: Reconcil-
ing Antitrust Law with Oligopoly Theory, 71 ANTITRUST L.J. 719, 729–30 (2004).
52
See generally ROBERT C. MARSHALL & LESLIE M. MARX, THE ECONOMICS OF
COLLUSION (2012); Edward J. Green et al., Tacit Collusion in Oligopoly, in 2 OXFORD
HANDBOOK OF INT’L ANTITRUST ECON. 464 (Roger D. Blair & D. Daniel Sokol eds.,
2015). High entry barriers exist where the costs of new entry into a market are high.
demand for new products), and (5) the “personality” of the firms oper-
ating in the market (e.g., mavericks).53 None of these variables are de-
terministic on their own. Rather, they all reflect general tendencies
subject to random deviations.
Enter algorithms. The effects of algorithms on coordination be-
tween competitors have captured the attention of academics, antitrust
authorities, and policy makers alike.54 Ezrachi and Stucke famously
identified four scenarios in which algorithms can be used to coordinate
conduct.55 In the first, algorithms are used to implement, monitor, po-
lice, or strengthen an explicit agreement between suppliers. The Top-
kins case, in which several sellers designed and shared AI-empowered
dynamic pricing algorithms that were programmed to act in accordance
with their illegal cartel, exemplifies this scenario.56 Another interesting
use of an algorithm to facilitate an existing cartelistic agreement, this
time a third-party-operated algorithm, comes from South Africa. The
case involved two competitors which sold face masks during the height
of the Covid-19 pandemic on Takealot, South Africa’s largest online
eCommerce marketplace. The South African Competition Commission
alleged that the two firms colluded to fix prices and divided the market
by ensuring that each competitor is ranked higher on allocated time pe-
riods. They did so by manipulating Takealot's ranking algorithm by
making use of the algorithm's features (such as price and stock availa-
bility) to influence their relative ranking position and visibility, in turn
impacting sale volumes.57
The second scenario involves hub-and-spoke arrangements, where
rivals rely for their decisions on the same provider of algorithmic deci-
sion-making services.58 Two recent cases exemplify allegations that the
use of such algorithms, under some circumstances, can amount to a car-
tel. In Gibson v. MGM it is claimed that hotels on the Las Vegas strip
53.
See, e.g., JEAN TIROLE, THE THEORY OF INDUSTRIAL ORGANIZATION (1988).
54
See, e.g., Ariel Ezrachi & Maurice E. Stucke, Artificial Intelligence & Collusion: When
Computers Inhibit Competition, 2017 U. ILL. L. REV. 1775 (2017); Ariel Ezrachi & Maurice
E. Stucke, Sustainable and Unchallenged Algorithmic Tacit Collusion, 17 NW. J. TECH. &
INTELL. PROP. 217 (2020). See also Salil K. Mehra, Antitrust and the Robo-Seller: Competi-
tion in the Time of Algorithms, 100 MINN. L. REV. 1323 (2016).
55
ARIEL EZRACHI AND MAURICE E. STUCKE, VIRTUAL COMPETITION: THE PROMISE AND
PERILS OF THE ALGORITHM-DRIVEN ECONOMY (2016).
56
Press Release, U.S. Dep’t of Just., Former E-Commerce Executive Charged with Price Fix-
ing in the Antitrust Division’s First Online Marketplace Prosecution (Apr. 6, 2015)
https://www.justice.gov/opa/pr/former-e-commerce-executive-charged-price-fixing-anti-
trust-divisions-first-online-marketplace.
57
Algorithmic Coordination- Note by South Africa, DAF/COMP/WD(2023)19, at 9-10,
https://one.oecd.org/document/DAF/COMP/WD(2023)19/en/pdf.
58
EZRACHI & STUCKE, supra note 55. For their economic effects see, e.g., Joseph E. Harring-
ton Jr, The Effect of Outsourcing Pricing Algorithms on Market Competition (2021),
https://ssrn.com/abstract=3798847.
2023 13
used a third-party provider pricing software to aggregate their pricing

strategy information, which affected the pricing recommendations from
the software, that were then used as a basis for pricing room offers.59
Similar allegations are being investigated by the Department of Justice
against Texas-based RealPage, a provider of an algorithm which helps
landlords set prices for apartments across the U.S.60 To arrive at a rec-
ommended rent, the algorithm analyzes the data RealPage gathers from
its clients, including private information on what nearby competitors
charge. While the algorithm only recommends the profit-maximizing
level of rent, a ProPublica investigation revealed a psychological effect
of algorithmic recommenders: their use strengthened the willingness of
property managers to raise prices significantly and frequently.61 Cases
of algorithmic hub-and-spoke coordination are also being investigated
in other jurisdictions.62 Algorithms can potentially facilitate collusive
agreements in a much wider set of circumstances, compared to humans.
This can be illustrated by a Spanish case, in which an algorithm was
used to set rules of minimum 4% on all online real-estate mediation
transactions, and to punish deviations. The collusion took place in a
decentralized environment with thousands of real estate agents, where
typically collusion would be difficult.63
Such cases often require the balancing of the pro and anti-compet-
itive effects of the algorithm. Such effects depend, inter alia, on the
market conditions and on the specifics of the algorithm used (e.g., the
origin of the input data, the parameters used by the algorithm, and how
its outputs are employed by its users).64 Hub-and-spoke algorithms can
offer many benefits. Take, for example, Uber's pricing algorithm. By
setting the prices for all Uber drivers rather than enabling each driver
59
Richard Gibson et al. v. MGM Resorts International et al., U.S. District Court, District of
Nevada, No. 2:23-cv-00140.
60
Heather Vogel, Department of Justice Opens Investigation into Real Estate Tech Company
Accused of Collusion with Landlords, PROPUBLICA, Nov. 23, 2022, https://www.propub-
lica.org/article/yieldstar-realpage-rent-doj-investigation-antitrust.
61
Heather Vogel, Rent Going Up? One Company’s Algorithm Could Be Why, PROPUBLICA,
Oct. 15, 2022, https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent.
62
For example, the Danish Competition Council found that a digital platform for professional
services created an illegal cartel when its algorithm suggested minimum prices that service
providers should charge clients on the platform. Press Release, Danish Competition and Con-
sumer Auth., Danish Competition Council: Ageras has infringed competition law (June 30,
2020), https://www.en.kfst.dk/nyheder/kfst/english/decisions/20200630-danish-competition-
council-ageras-has-infringed-competition-law/. The EU Court of Justice found that a Latvian
travel booking software, used by most Latvian travel agencies, was employed as a tool for
limiting the price reductions on travel packages. Case C-74/14, Eturas v. Competition Council
of the Republic of Lithuania, 4 C.M.L.R. 19 (2016).
63
Algorithmic Competition - Note by Spain, DAF/COMP/WD(2023)16 (2023), at para. 5-
16, https://one.oecd.org/document/DAF/COMP/WD(2023)16/en/pdf.
64
See also Harrington, supra note 58.
to set his own price, it provides a centralized system for matching de-
mand and supply. For these reasons, the Brazilian Competition Author-
ity dismissed the cartel allegations brought against Uber.65 Other
enforcers reached different conclusions. In Meyer v. Kalanick, for ex-
ample, a U.S. judge declined to dismiss allegations that Uber's algo-
rithm enables Uber drivers to fix prices, finding that on its face, the
claims were sufficient to support an allegation of an agreement in re-
straint of trade.66 In a world where the use of third-party pricing or pric-
ing recommender systems are becoming more commonplace, we are
bound to see a stronger need to balance competing interests, and for
fashioning of appropriate remedies.
The third scenario relates to the use of an expert algorithm in a way
that can be expected to create or strengthen price coordination (e.g., a
leader–follower algorithm).67 To our knowledge, no cases were brought
based on the use of such algorithms, anywhere around the world.
In the fourth scenario, the algorithm is given a goal (e.g., profit
maximization), and independently and autonomously determines its
own pricing strategies (“algorithmic coordination”).68 While the use of
such AI-powered algorithms can alter market dynamics so as to im-
prove social welfare, there remains a real possibility that algorithms can
limit the ability of markets to otherwise generate low, competitive
prices.69 Indeed, there is a growing and well-founded consensus that
AI-powered pricing algorithms can make it easier for competitors to
coordinate and sustain increased prices in markets where such coordi-
nation was previously much more difficult.
This consensus is based on theoretical, experimental, and empirical
studies. Theoretical studies highlight the traits of pricing algorithms
and the ecosystem in which they operate, which increase the tendency
towards coordination.70 For instance, the speed at which algorithms op-
erate suggests that when transactions are small and frequent and prices
are transparent, price reductions can be immediately detected and
65
See, e.g., Algorithmic Competition - Note by Brazil, DAF/COMP/WD(2023)18 (2023), at
7-9, https://one.oecd.org/document/DAF/COMP/WD(2023)18/en/pdf (The app operated to
optimize demand and supply for individual passenger transportation services. Furthermore,
there was no exchange of competitively sensitive information nor a collusive arrangement
between partner drivers due to Uber’s actions).
66
See, e.g., Meyer v. Kalanick, No. 1:2015cv09796, Doc. 37, Opinion on Motion to Dismiss
(S.D.N.Y. 2016)(case brought against the CEO of Uber. The case eventually headed to arbi-
tration.)
67
See EZRACHI & STUCKE, id.; Ilgin Isgenc, Competition Law in the AI ERA: Algorithmic
Collusion under EU Competition, 24 TRINITY C.L. REV. 35, 40-42 (2021).
68
Ezrachi & Stucke, Artificial Intelligence, supra note 54, at 1794-1796.
69
EZRACHI & STUCKE, supra note 55.
70
See, e.g., EZRACHI & STUCKE, supra note 55; Gal, Illegal Agreements, supra note 1;
ALGORITHMS, COLLUSION AND COMPETITION LAW (Steven Van Uytsel, Salil K. Mehra, and
Yoshiteru Uemura eds., 2023).
2023 15
matched, making them unprofitable.71 Furthermore, their analytical so-

phistication increases their ability to extract information from big data.
This enables them to better predict demand as well as the likely reac-
tions of rivals to changes in market conditions (including their own
prices), thereby reducing the risk of making pricing mistakes.72 Recent
experimental studies using computer simulation have revealed the
emergence of autonomous algorithmic coordination under some market
conditions, suggesting that conscious parallelism by pricing algorithms
is a real possibility.73 In these studies, coordination arose with no hu-
man intervention.74 Furthermore, the algorithms did not condition their
strategy on rivals’ commitments to stick to the supra-competitive equi-
librium, and did not communicate directly.75 Finally, empirical evi-
dence showing that algorithms can learn to coordinate in practice is also
beginning to accumulate.76 In a famous study, Assad, Clark, Ershov and
Xu found that the use of pricing algorithms in the German retail gaso-
line market raised prices substantially (9–28%) after both firms in a
duopoly situation switched from manual to algorithmic pricing.77
Similar to the expert algorithm scenario, no cases regarding agree-
ments in restraint of trade have been brought so far around the world
against algorithmic coordination. Yet this does not imply that such con-
duct does not take place. Two reasons might explain this conundrum.
First, is might be difficult for regulators to separate the beneficial and
harmful effects of the algorithm in a way which enables them to fashion
an effective and efficient remedy.78 Second, and more importantly,
71
Antonio Capobianco & Pedro Gonzaga, Algorithms and Competition: Friends or Foes?,
COMP. POL. INT'L 2 (August 2017); OECD, COLLUSION, supra note 1, at 23-24.
72
Peter Georg Picht & Benedikt Freund, Competition (Law) in the Era of Algorithms 6 (Max
Planck Inst. for Innovation & Competition, Research Paper No. 18-10, 2018).
73
See, e.g., Emilio Calvano, Giacomo Calzolari, Vincenzo Denicolò, & Sergio Pastorello,
Artificial Intelligence, Algorithmic Pricing, and Collusion, 110 AM. ECON. REV. 3267 (2020).
For work on prediction algorithms see, e.g., Jeanine Miklós-Thal & Catherine Tucker, Collu-
sion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers?
65 MANAGEMENT SCI. 1552 (2019).
74
In a follow-up study Calvano et al. also show that algorithmic collusion can cope with more
complex economic environments with imperfect information and imperfect monitoring.
Emilio Calvano et al., Algorithmic Collusion with Imperfect Monitoring, 79 INT'L J. INDUS.
ORG. 79 (2021).
75
Id.
76
Assad et al., supra note 13, at 5. Interestingly, in 2022, the German competition authority
approved a merger between two large retail gasoline providers on the condition that they di-
vest several stations. The decision was partly based on the fact that "actual price setting is
usually software-supported…, which enables a very fast reaction to price changes." Bun-
deskartellamt, Acquisition of OMV petrol station network by EG Group (Esso) cleared under
the condition that 48 service stations be sold to third companies (Feb. 10, 2022),
https://www.budeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2022/11_02_
2022_EG_OMV.html?nn=3599398.
77
Assad et al., supra note 13, at 5.
78
See a discussion of remedies in Gal, Coordination, supra note 6.
some uses of expert and autonomous algorithms are considered to be

legal. The existence of “an agreement in restraint of trade”79 has been
interpreted as the offer and acceptance of an agreement not to com-
pete.80 Pure conscious parallelism is not prohibited, even though its ef-
fects on consumers may be similar to those of an illegal cartel.81
Nonetheless, we might see some cases on the future, given that some
uses of expert or autonomous algorithms (such as using them as a com-
mitment device), or some conditions surrounding their use (such as
making them transparent to rivals), might amount to facilitating prac-
tices (plus factors).82
Type of conduct Potential Effects of Potentially Cap-

algorithms tured under Sec-
tion 1
Algorithms as tools Lowering barriers to Yes
to facilitate existing an agreement
agreements
Hub-and-Spoke al- Lowering barriers to Yes
gorithms an agreement
79
Section 1 of the Sherman Act, including its sub-category of facilitating practices. Gal, Ille-
gal Agreements, supra note 1.
80
Louis Kaplow, On the Meaning of Horizontal Agreements in Competition Law, 99 CALIF.
L. REV. 683 (2011). Carlton et al. suggest that it can be difficult to define agreement when
examining the conduct of economic agents when no express communication has occurred.
Dennis W. Carlton, Robert H. Gertner & Andrew M. Rosenfeld, Communication Among Com-
petitors: Game Theory and Antitrust 5 GEORGE MASON L. REV. 423, 424 (1997).
81
Theatre Enter. Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 541 (1954); E.I. Dupont
de Nemours & Co. v. FTC, 729 F.2d 128, 139 (2d Cir. 1984). Recently, however, the FTC
noted that practices which facilitate tacit coordination violate the spirit of the antitrust laws.
FTC, Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section
5 of the Federal Trade Commission Act Commission, Nov. 10, 2022, at 13. For a case finding
that algorithmic coordination does not amount to an agreement see Algorithmic Competition-
Note by Brazil, DAF/COMP/WD(2023)18 (2023), at 3-4, https://one.oecd.org/docu-
ment/DAF/COMP/WD(2023)18/en/pdf (investigation of algorithmic coordination in the air-
line industry).
82
An illegal facilitating practice is an avoidable act that facilitates coordination with no other
beneficial function. Gal, Illegal agreements, supra, note 1. In addition, some countries, such
as Britain, empower their competition authorities to engage in market inquiries and design
remedies to market failures that do not otherwise involve traditional competition law prohi-
bitions. See, generally, MARKET INVESTIGATIONS (Massimo Motta, Martin Peitz & Heike
Schweitzer eds., 2021). Other solutions are being examined all over the world. For an over-
view see, e.g., Gal, Coordination, supra note 6.
2023 17
Expert algorithms Lowering barriers to Yes

and Algorithmic co- an agreement
ordination
Lowering barriers to No, unless facilitat-

conscious parallel- ing practice
ism
Table 1: The effects of AI on coordinated conduct and the availa-

bility of non-merger tools to deal with them
2. Implications for Merger Review
Merger review has an important role to play in regulating all types

of coordination. By prohibiting changes in market conditions, it can
prevent or weaken the successful operation of some cartels. For exam-
ple, prohibiting the buy-out of a maverick firm can help destabilize an
algorithmic-supported cartel such as that in the Topkins case.83 Merger
policy can also limit the ability of firms to gather the necessary data to
engage in hub-and-spoke arrangements that harm competition. To il-
lustrate, the investigation against RealPage, mentioned above, also
raises questions regarding a 2017 merger between RealPage and its
largest pricing competitor,84 that could have allowed the merging of the
two firms' datasets on rental prices. The importance of such data arises
from the fact that to arrive at a recommended rent, RealPage's algorithm
analyzes the data it gathers from its clients, including private infor-
mation on what nearby competitors charge.85
In addition, merger review plays an essential role in the antitrust
toolbox to limit algorithmic coordination.86 Ostensibly, such coordina-
tion might make merger review less relevant, all else being equal. This
is because if coordination can be facilitated by algorithms under a wider
range of market conditions, with the resulting equilibriums more stable,
firms will have less of an incentive to merge in order to increase profits
via coordination.87 Nevertheless, merger review still plays an important
role given its wide scope for inquiry, the fact that it is outcome-based
rather than process-based, and the flexibility of its potential remedies.88
83
United States v. Topkins, No. CR-15-00201 (N.D. Cal. Apr. 6, 2015).
84
Vogel, Investigation into Real Estate, supra note 60.
85
Vogel, Rent Going Up?, supra note 61.
86
Majority Staff Report, supra note 44. This Part partially builds on Gal, Coordination, supra
note 13, at Chapter IV.
87
Ariel Ezrachi & Maurice E. Stucke, Two Artificial Neural Networks Meet in an Online Hub
and Change the Future (Of Competition, Market Dynamics and Society) (Univ. of Tenn. Coll.
of L., Legal Stud. Rsch. Paper Ser. No. 323, 2017).
88
See also Coutts, supra note 6.
Accordingly, merger review can play a double, interconnected role.

First, it can prohibit mergers that increase algorithmic coordination
with few or minimal offsetting benefits. Second, merger fixes can be
designed to give greater weight to the possibility of algorithmic coor-
dination. Competition authorities, international organizations, and
scholars have voiced support for this notion.89
While the existing U.S. horizontal merger guidelines are suffi-
ciently flexible to consider the possibility of algorithmic coordination,
the concerns just raised suggest that several improvements would be
appropriate.
Algorithms affect intervention thresholds. Specifically, reporting
thresholds might need to be attuned to coordination in the age of
algorithms, capturing mergers that increase algorithmic coordination
yet would otherwise fall under the radar.90 To illustrate, assume that the
acquired firm has limited annual sales,91 but its trade-term-setting algo-
rithm acts as a maverick, disrupting the coordinated equilibrium. Or
assume that the acquired firm’s algorithm or dataset constitutes its main
competitive asset. A better monitoring, data cleaning, or predictive al-
gorithm, or a better dataset with which to train such algorithms, could
more easily facilitate algorithmic coordination. Yet the merger may not
be captured under current merger review thresholds, because the owner
might have limited sales since the algorithm or dataset has not yet been
used commercially—whether as a strategic decision, to ensure that the
merger need not be notified, or because the owner does not have the
ability to enjoy its potential. A potential solution involves adding a cat-
egory to merger review thresholds in digital markets involving algo-
rithms, which is based on the overall payment for the acquisition.92
Algorithmic coordination also affects structural presumptions
used to screen mergers. Concentration parameters (such as the Her-
findahl-Hirschman Index) are given substantial weight in determining
intervention thresholds,93 based on a general assumption that oligopo-
listic coordination is likely to take place where the market is highly
concentrated. The current level at which these parameters are set as-
sumes that mergers in markets with four or more firms are not likely to
89
See discussion of some of the recommendations infra.
90
Ezrachi & Stucke, Artificial Neural Networks, supra note 87, at 46; Coutts, supra note 6.
91
Clayton Act 7A, 15 USC 18a.
92
This solution was adopted in Germany to capture "killer acquisitions". Bundeskartellamt
(BKA) and Bundeswettbewerbsbehörde (BWB), Guidance on Transaction Value Thresholds
for Mandatory Pre-merger Notification (Section 35 (1a) GWB and Section 9 (4) KartG) (July,
2018); Claire Turgot, Killer Acquisitions in Digital Markets: Evaluating the Effectiveness of
the EU Merger Control Regime, 5 EUR. COMPETITION & REG. L. REV. 112, 118 (2021).
93
DEP'T JUST. & FED. TRADE COMM'N, HORIZONTAL MERGER GUIDELINES ¶ 1.5 (1997).
2023 19
lead to coordination.94 Algorithmic coordination challenges these as-

sumptions. Accordingly, where the risk of algorithms coordination is
high, concentration parameters might need to be lowered.95 Further-
more, intervention thresholds should also be more sensitive to the ac-
cumulated knowledge regarding the market conditions increase the
probability of algorithmic coordination. For example, the speed and so-
phistication of reactions when algorithms are used to monitor, predict
and set trade terms, should affect presumptions as to the maximal num-
ber of firms in a market needed to raise coordination concerns.96
Algorithms also affect the types of in-depth analysis of the poten-
tial benefits and harms of the merger. Regulators may need to be more
attuned to the potential effects of changes in market conditions on al-
gorithmic coordination. Consider the following scenarios:97
A. The merger will shorten the time needed to reach algorithmic

coordination. Consider, for example, a market with five market
players. Three adopt a follow-the-leader pricing algorithm, while
two adopt learning algorithms that are given the task of price max-
imization. Learning algorithms can take a long time to coordi-
nate.98 But if the merger takes one learning algorithm out of the
game, coordination will be easier to achieve.99
B. A firm is acquired for its dataset, on which the algorithm is

trained or utilized.100 One of the main obstacles to coordination
is that market players cannot easily determine whether changes in
market conditions result from external factors, or from deviations
from the coordinated equilibrium.101 Where a combined dataset
94
GUIDELINES, id.
95
Ezrachi & Stucke, Artificial Neural Networks, supra note 87, at 31 (5 to 6); OECD
COLLUSION, supra, note 1, at 43 (5 to 4); Gal, Illegal Agreements, supra note 1 (sometimes
even further)
96
OECD, id, at 43.
97
Gal, Coordination, supra note 6. See also Egerton-Doyle and Ford, supra note 5 (cataloging
the various ways in which the analysis of algorithms and big data have featured in merger
control decisions).
98
Calvano et al., supra note 73.
99
The acquired firm might choose not to adopt a follow-the-leader algorithm due to trust
issues, on ensuring that the leader actually sets the best prices, on the assumption that a learn-
ing algorithm will be less prone to regulatory scrutiny, or on increasing the motivation of the
other market players to acquire it.
100
The importance of algorithms and data as parameters in merger review has already been
recognized. See, e.g., Chirita, supra note 43; MARIA, WASASTJERNA, BIG DATA AND PRIVACY
IN MERGER REVIEW - COMPETITION POLICY FOR THE 21ST CENTURY DIGITAL ECONOMY
(2020).
101
Francisco Beneke & Mark-Oliver Mackenrodt, Artificial intelligence and Collusion,
50 IIC-INT'L REV. OF INTELL. PROP. & COMPETITION L. 109, 126-7 (2017).
makes it easier to distinguish between these two causes, coordina-

tion may be more effective. Alternatively, a merger that combines
two firms’ datasets on consumers' personal characteristics102 and
strengthen the merged entity's ability to engage in price discrimi-
nation, may make it harder for firms to coordinate.103 The Real-
Page/Rainmaker merger, noted above, might have partly been
based on such considerations.104
C. A firm is acquired for its algorithm. There may be several rea-

sons why such an acquisition might increase the potential for co-
ordination. We note three. Unless the algorithm is transparent to
rivals, a merger can reduce uncertainty concerning how a rival sets
his prices; acquiring an efficient algorithm can shorten the time
needed to reach coordination; and acquiring an efficient algo-
rithm, which reduces the need for data, may increase a firm’s abil-
ity to coordinate in complex situations. The British Competition
and Markets Authority recognized such latter effects when weigh-
ing whether to approve Amazon’s acquisition of a minority share-
holding in Deliveroo.105 As part of their submissions, the merging
parties had to show that their algorithms were differently struc-
tured and optimized.106 This decision also illustrates that merger
analyses should consider the possibility that a separate product
market might exist for algorithms with unique capabilities.107
D. Conglomerate mergers. Such mergers are generally assumed to

be benign, and are rarely prohibited. As Donini suggests, the so-
phistication of algorithms can change this, given that pricing algo-
rithms can respond to punishment mechanisms even in distinct
product industries through multi-market contacts.108 Accordingly,
conglomerate mergers, particularly those between firms offering
related product types in different geographic markets, should not
102
Such combinations might be subject to legal limitations, such as privacy laws.
103
Gal, Illegal Agreements, supra note 1, at 96.
104
Vogel, Investigation into Real Estate, supra note 60.
105
UK Competition and Markets Authority, Anticipated acquisition by Amazon of a minority
shareholding and certain rights in Deliveroo: Final Report, para 46 (Aug. 4, 2020).
106
Id.
107
For example, in Sanofi/Google/DMI JV, the European Commission left open the possibil-
ity that there is a separate market for algorithms analyzing healthcare data. COMP/M 7813,
Sanofi/Google/DMI JV, Feb. 23, 2016, https://ec.europa.eu/competition/mergers/cases/deci-
sions/m7813_479_2.pdf, para. 45-48
108
Federico Ciliberto & Jonathan W. William, Does Multimarket Contact Facilitate Tacit
Collusion? Inference on Conduct Parameters in the Airline Industry 45(4) RAND J. ECON.
765 (2014).
2023 21
fly under the radar.109 In addition, due to transfer learning, algo-

rithms created for use in one market might also be used in other
markets. In such cases, the fact that the merging firms are not di-
rect competitors is of little relevance. The same is true with regard
to datasets: the fact that a dataset might have been collected for
one purpose in one market does not imply it has no possible rele-
vance in a different market.110
Consider also the weight given to asymmetry in merger review.

Pricing algorithms can reduce the incentive of asymmetric firms to de-
viate under some circumstances. Similarly, while it is true that firms
are better able to estimate the cost structure, production capacity, and
other key supply conditions of symmetric competitors compared to
asymmetric competitors, algorithmic predictive modeling can help
firms understand their asymmetric competitors and the prevailing de-
mand conditions, thereby simplifying the process of establishing a su-
pra-competitive equilibrium.111
Or consider presumptions relating to potential efficiencies. The
ability to enjoy high profits through algorithmic coordination might
limit the incentives to merge. This is because even if prices might rise
under either a merger and a coordinated scheme, the two differ in the
owners’ control rights, increasing the probability that a merger will bet-
ter enable the realization of scale and scope economies.112 This, in turn,
affects the analysis of the counter-factual. To illustrate, consider an in-
dustry in which efficient levels of operation support three efficient
players, but where algorithmic coordination can sustain six players, op-
erating at inefficient production levels. Allowing market consolidations
via mergers to three players, all operating at efficient levels, might re-
duce productive inefficiencies. Furthermore, the use of algorithms will
almost always create some efficiencies, such as speed, sophistication,
precision, and reduced costs for making decisions. Such efficiencies
would need to be recognized and balanced against potential anti-com-
petitive effects.
109
ELENA DONINI, COLLUSION AND ANTITRUST: THE DARK SIDE OF PRICING ALGORITHMS
105 (2019), https://www.associazioneantitrustitaliana.it/wp-content/uploads/2020/10/Tesi-
Elena-Donini.pdf.
110
See also Miller, supra note 43, at 312.
111
Coutts, supra note 6, p. 28.
112
For a classification of organizational forms that differentiate between mergers, strategic
alliances, and joint ventures see George Baker, Robert Gibbons & Kevin J. Murphy, Strategic
Alliances: Bridges Between “Islands of Conscious Power,” 22(2) J. JAPANESE AND INT'L
ECON. 146 (2008).
Algorithmic coordination also affects merger remedies. Take, for

example, the goal of preserving asymmetries and heterogeneities be-
tween market participants.113 Doing so, it is believed, protects compe-
tition by making it harder for firms to coordinate. Yet if trade-term-
setting and predictive algorithms can overcome some of these tradi-
tional obstacles to coordination, preserving such market conditions will
not have a substantial effect on competition.114
Algorithmic coordination also makes structural remedies less ef-
fective. Increasing asymmetries, via divestiture, reduces the likelihood
of coordinated effects, but raises the likelihood of unilateral effects, and
vice versa.115 Accordingly, as Coutts argues, “[i]n markets in which
pricing algorithms are ubiquitous, the propensity for symmetric reme-
dies backfiring appears to increase significantly… Increasing the sym-
metry of market participants in order to address concerns of unilateral
effects (or coordinated effects vis-à-vis asymmetric price leadership)
may in fact reduce consumer welfare by a greater degree than simply
allowing the merger to proceed unmodified.”116
Furthermore, the potential for algorithmic coordination should also
affect pre-merger procedures.117 Disclosure of a pricing algorithm
might contravene antitrust prohibitions on the sharing of competitively
sensitive information.118 While such disclosure might be required to ex-
pose assets that may create value, it could also increase algorithmic co-
ordination through signaling, or by reducing the need for
experimentation and uncertainty.119 Firms may therefore expose their
algorithms and datasets under the guise of a potential merger, without
seriously contemplating one. To address such concerns, Coutts sug-
gests that due diligence be structured to increase the sensitivity of cer-
tain types of information that would ordinarily be permissible to
113
See, e.g. Merger Guidelines, supra note 93, para. 7. See also, U.K. Competition & Mkts.
Auth, Merger Assessment Guidelines (2010), para 5.5.11
114
See also Coutts, supra note 6, at 15-22 (arguing, for example, that algorithms can mitigate
market complexity by determining focal points or understanding “invitations to collude” that
a human could not; by reacting more speedily; and steering firms towards pricing strategies
that take a long-term view of profitability when balancing the prospects of short term and
long-term gains. Algorithms may also help overcome asymmetry between would-be colluders
through better estimation of competitors’ otherwise private information; by reconciling com-
peting incentives and preferred equilibria; and by easing the implementation of effective re-
ward/punishment schemes between asymmetric firms).
115
See Luke Garrod & Matthew Olczak, Collusion under Imperfect Monitoring with Asym-
metric Firms, 65 J. INDUS. ECON. 654, 656 (2017).
116
Id.
117
Coutts, supra note 6.
118
Id.
119
Id.
2023 23
disclose.120 For example, ordinarily information becomes less compet-

itively sensitive as it becomes less current. Yet a dataset on past market
conditions could provide the basis for training an algorithm to coordi-
nate. This might imply that absent strong pro-competitive justifications,
firms should be allowed to expose the algorithm or the dataset only to
a third party.
Lastly, the analysis should also account for the operation or the in-
creased potential of algorithms to act as counterweights to coordi-
nated conduct. Consumers can use algorithms to make their purchases,
thereby increasing the possibility of creating an automatic and efficient
buying group.121 Such a buying group could create countervailing buy-
ing power which, in turn, can potentially break coordination between
sellers by introducing another element into each supplier's decision-
making: the ability to supply a large quantity at lower price. The result-
ing increase in the profits can potentially weaken the stability of the
coordinated conduct.122 Alternatively, should algorithmic consumers
represent a sufficiently large number of consumers, they could negoti-
ate a deal outside the digital sphere. Such external deals need not affect
the price exhibited online, and thus may not be known to other suppli-
ers.123 Given their analytical sophistication, algorithmic consumers can
also test, devise, and apply other strategies to motivate suppliers to re-
duce prices.124 For example, algorithmic consumers could decide not to
buy beyond a certain price, or could delay demand signals. In doing so,
algorithmic consumers reduce consumers’ collective action problem.125
Where market conditions are such that consumers, rather than suppli-
ers, can relatively easily employ the benefits of AI to reduce coordina-
tion, this possibility should not be disregarded in merger decisions.126
We have seen that a variety of factors can lead to algorithmic co-
ordination.127 Hence, we think it sensible for merger authorities to
adopt a weighed effects approach, which is based on the aggregation
of both the likelihood and the magnitude of the merger’s impact under
different scenarios. As spelled out by the UK’s Digital Competition Ex-
pert Report, this would involve an overall assessment based on poten-
tial risks under a range of factual and counterfactual scenarios.128 Such
120
Id.
121
Michal S. Gal and Niva Elkin-Koren, Algorithmic Consumers, 30(2) HARV. J. L. & TECH.
310 (2017).
122
Id.
123
Gal, Limiting Coordination, supra note 6.
124
Id.
125
Id.
126
Gal, Coordination, supra note 6.
127
Merger Guidelines, supra note 93, at ¶ 2.12.
128
DIGIT. COMPETITION EXPERT PANEL, UNLOCKING DIGITAL COMPETITION (2019), https://
assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/
785547/unlocking_digital_competition_furman_review_web.pdf.
analysis can be aided by predictive algorithms, used to determine both

the level of risk and the magnitude of each potential effect.
IV. ALGORITHMS AND UNILATERAL CONDUCT
Algorithms also affect the ability of firms to engage in unilateral

conduct that has the potential to reduce consumer welfare. This section
briefly reviews the effects of algorithms on the creation of unilateral
market power by way of legally obtained comparative advantages. It
then focuses on the potential effects of algorithms on five types of uni-
lateral conduct: high prices, price discrimination, predation, selective
pricing, and limiting interoperability. The implications for merger pol-
icy are then discussed.
1. Algorithms and Market Power
To engage in unilateral conduct that might harm consumers, firms

must enjoy market power. Market power, in turn, may result from
unique products or services, potentially empowered by all six groups of
algorithms discussed above. To illustrate, Google's real-time search
data and the predictive algorithms that analyze such data can better de-
termine the ads that are most likely to influence each user at a given
time.129 Market power may also be strengthened by algorithms that
make the most of existing data, increasing the efficiency of data collec-
tion, storage, cleaning, analysis, portability or interoperability; by algo-
rithms that incorporate previous learnings from other datasets (transfer
learnings);130 or by algorithms that require less data, creating compara-
tive advantages where the collection, cleaning, or organization of data
is impossible or costly.
Furthermore, AI-powered algorithms can broaden the scope of
data-derived diversification, thereby unlocking new value and assisting
firms to grow more efficiently and rapidly.131 Such growth can also ex-
tend to other markets, creating economies of scope from data reuse
across industry lines, potentially creating AI-enabled data-based eco-
systems.132
129
See, e.g., Complaint, U.S. v. Google LLC. (Oct. 20, 2020).
130
Recent studies have shown that investments in AI in one part of a conglomerate were
associated with increased investments in other parts thereof. T. Babina et al., Artificial Intel-
ligence, Firm Growth, and Industry Concentration (2020), https://papers.ssrn.com/sol3/pa-
pers.cfm?abstract_id=3651052.
131
David J. Teece, Big Tech and Strategic Management: How Management Scholars can
Inform Competition Policy, 37 ACADEMY OF MANAGEMENT PERSPECTIVES 1, 2 (2023).
132
Id, at 3.
2023 25
Merit-based superior dynamic capabilities may increase productive

and dynamic efficiency as well as consumer welfare. At the same time,
they might also raise barriers to rivals’ access to important inputs. For
instance, when the training of AI creates user-generated network ef-
fects, first-mover advantages may be significant. Furthermore, data-
based ecosystems might be more difficult to replicate. Some recent
studies suggest that such advantages can heighten barriers to technol-
ogy diffusion and lead to declines in business dynamism.133
This implies that mergers in which algorithm contribute to the cre-
ation or strengthening of market power by way of dynamic capabilities,
should be subject to a cost-benefit analysis. The ability of algorithms,
under some circumstances, to increase anti-competitive conduct, which
is the focus of the next section, adds another layer to the considerations
that should be balanced.
2. Algorithms and Unilateral Conduct
In this section we explore the effects of algorithms on five types of

unilateral conduct that affect merger review analyses. Of course, other
types of exclusionary or exploitative conduct are also possible.134
A. High Prices
Firms with substantial market power can unilaterally charge ho-

mogenous supra-competitive prices.135 To maximize its profits, a firm
must be able to determine the price level that best accounts for consum-
ers' willingness to pay (WTP). Yet such calculations are not easy, as
they require predicting how consumers will react under different, po-
tentially dynamic market conditions. They may also need to account for
the existence of groups of consumers with different WTPs. In particu-
lar, setting the price too high could have long-term implications, espe-
cially if prices are difficult to change once set.136
133
See, e.g., F. Calvino, C. Criscuolo & R. Verlhac, OECD, Declining Business Dynamism:
Structural and Policy Determinants (2020), https://www.oecd-ilibrary.org/science-and-tech-
nology/declining-business-dynamism_77b92072-en.
134
See, e.g., CMA, supra note 3, at 23-33 (discussing, inter alia, dark patterns, unfair ranking
and design, and self-preferencing); Noga Blickstein-Shchory & Michal S. Gal, Market Power
Parasites, 35(1) HARV. J. L. TECH. 73 (2021)(discussing the abuse of platform algorithms by
third parties, in order to increase rivals' costs); OECD, Algorithmic Competition, supra note
10, at 15-18 (citing several recent cases which sanctioned monopolistic firms for using an
algorithm for self-preferencing).
135
Such prices can be monetary or non-monetary (such as data collection terms). OECD,
Algorithmic Competition, supra note 10, at 21.
136
For example, it could affect consumers' reactions based on price fairness conceptions. Dan-
iel Kahneman, J. Knetsch, and Richard Thaler, Fairness as a Constraint on Profit Seeking:
Entitlements in the Market, 76(4) AM. ECON. REV. 728 (1986).
Enter algorithms. Predictive algorithms can better analyze the ef-

fects of current and foreseeable market conditions on WTP. They may
also allow firms to more quickly and efficiently adjust prices closer to
their profit-maximizing level. Employing such algorithms may thus en-
able firms to profitably increase their prices.137
In addition, as McSweeny and O'Dea have noted, algorithms can
better differentiate between groups of consumers based on their elastic-
ity of demand, and detect niche markets in which firms can enjoy
greater market power (monopolistic competition), and thus be able to
charge higher prices.138
B. Price Discrimination
Algorithms can also increase firms’ ability to engage in discrimi-

nation, whether with respect to prices or other trade terms.139 For ex-
ample, Uber uses a pricing algorithm to set the prices independently for
each ride. The algorithm detects situations where riders are more vul-
nerable—for instance, when they are using a phone which is almost out
of a battery charge, implying that they cannot afford to multi-home,140
and take advantage of that vulnerability to charge higher prices.141 To
see how algorithms affect discrimination, we briefly explore the condi-
tions necessary for such conduct.
137
Of course, the use of such algorithms can also lower prices in some cases, depending on
the circumstances.
138
Terrell McSweeny and Brian O'Dea, The Implications of Algorithmic Pricing for Coordi-
nated Effects Analysis and Price Discrimination Markets in Antitrust Enforcement, 32(1)
ANTITRUST 2 (2017).
139
See, e.g., Axel Gautier, Ashwin Ittoo & Pieter Van Cleynenbreugel, AI Algorithms, Price
Discrimination and Collusion: A Technological, Economic and Legal Perspective, 50 EUR. J.
L. & ECON. 405, 406-407 (2020); Deng & Hernandez, supra note 25 (a merger between firms
with complementary data on which the algorithm can better learn, will result in higher prices
for individual consumers). Interestingly, price discrimination reduces the ability of firms to
engage in coordinated pricing. Gal, Illegal Agreements, supra note 1. Interestingly, surveys of
markets do not reveal much evidence of first-degree price discrimination. Marco Botta &
Klaus Wiedemann, To Discriminate or Not to Discriminate? Personalised Pricing in Online
Markets as Exploitative Abuse of Dominance, 50 EUR. J. OF L. & ECON. 381, 388, 400 (2020).
This might be partially explained by behavioral economics, which suggests consumers react
negatively to personalized prices. OECD, Algorithmic Competition, supra note 10, at 9. In
some markets, this can be partially overcome by slightly differentiating the offers or the prod-
ucts, to reduce comparisons. Algorithms can assist in optimizing such conduct.
140
Compare offers on different applications or websites. Ryan Calo & Alex Rosenblat, The
Taking Economy: Uber, Information, and Power, 117 COLUM. L. REV. 1623, 1657 (2017).
Multi-homing involves comparing offers on different applications or websites.
141
Le Chen, Alan Mislove & Christo Wilson, Peeking Beneath the Hood of Uber (Internet
Measurement Conference, Tokyo, 28-30 October 2015),
https://www.ccs.neu.edu/home/amislove/publications/Uber-IMC.pdf (Uber charged different
prices for customers in the same area at the same time); Christopher Leslie, Predatory Pricing
Algorithms, 97 NYU L. REV. (2023).
2023 27
Price discrimination is defined as charging different customers dif-

ferent prices for similar products or services, based on their (assumed)
elasticities of demand.142 Economic theory differentiates between three
types of discrimination.143 First-degree, or perfect, discrimination oc-
curs when the price for each unit is equal to each consumer's WTP. In
second-degree discrimination, the price per unit is adjusted based on
the amount or quantity consumed, as in the case of quantity discounts.
In third-degree discrimination, the seller distinguishes between differ-
ent groups of consumers based on their presumed similar WTP, as when
entry fees are set lower for seniors and children than for adults. The
better the data on WTP, the closer one can get to first-degree discrimi-
nation and to prices that extract the maximum surplus from each con-
sumer.144 Price discrimination can, in some cases, increase output and
in that sense be pro-competitive. However, it can also have significant
exclusionary and exploitative effects.145
Three conditions must exist for discrimination to succeed. First, the
discriminator must have information about consumers' WTP. Second,
it must enjoy market power; otherwise rivals would be able to easily
undercut higher prices. Third, it must be difficult for low-paying con-
sumers to easily resell to others via a secondary market.146
Economists often question the feasibility and profitability of price
discrimination. Their skepticism has two main sources: the difficulty of
accessing the data needed to engage in first-degree discrimination; and
the difficulty of negotiating with each customer separately in order to
extract the maximum payment, especially for a company that sells to a
wide customer base.147
This skepticism has affected the scope of the legal prohibition in
the U.S. Price discrimination is generally lawful, with the exception of
Section 2(a) of the Clayton Act, as amended by the Robinson-Patman
Act.148 The jurisprudence usually associates this law with two types of
practices. The first is predatory price discrimination,149 elaborated in
142
Benjamin Klein & John Shepard Wiley, Competitive Price Discrimination as an Antitrust
Justification for Intellectual Property Refusals to Deal, 70 ANTITRUST L. J. 599, 603-604
(2003).
143
A. C. Pigou, Discriminating Monopoly, in THE ECONOMICS OF WELFARE 272 (1932); see
also R.S. PINDYCK AND D.L. RUBINFELD, MICROECONOMICS (9th ed., 2017), chapter 11.
144
Gautier, Ittoo & Van Cleynenbreugel, supra note 139.
145
United States, Note to OECD, Price Discrimination, DAF/COMP/WD(2016)69, at 3,
https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-inter-
national-competition-fora/price_discrimination_united_states.pdf.
146
Gautier, Ittoo & Van Cleynenbreugel, supra note 139.
147
Mcsweeny & O'dea, supra note 138.
148
15 U.S.C. § 13(a)(sellers are not allowed to engage in price discrimination where its effect
"may be substantially to lessen competition or tend to create a monopoly in any line of com-
merce, or to injure, destroy, or prevent competition with any person who either grants or
knowingly receives the benefit of such discrimination, or with customers of either of them").
149
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209. 221 (1993).
the next sub-part. The second is exclusionary conduct, leading to fore-

closure of a supplier's non-preferred customers.150
Enter algorithms. Algorithms affect both the feasibility and the
profitability of discrimination. The increased availability of high qual-
ity real-time data in digital markets, and algorithms' ability to process
such data quickly and efficiently, allows for differential pricing with a
level of accuracy that might not be far from first-degree price discrim-
ination.151 Equally, the sophistication of today's algorithms, which can
analyze a large number of factors simultaneously over a very large da-
taset, can identify narrower consumer segments in which competition
has more limited effects, thus enabling third-degree discrimination.152
In such a setting, algorithms provide an efficient mechanism to reduce
the costs of price discrimination—and these costs may continue to fall
further, along with the costs of data collection, storage, analysis, and
communication. Furthermore, while discriminatory pricing has tradi-
tionally been largely restricted to the wholesale level, platforms that
connect suppliers directly and cheaply with individual consumers now
make it easier to use targeted pricing at the retail level as well.153
C. Predation
Algorithms increase the potential for predatory pricing.154 Preda-

tion is a two-stage strategy. In the first, the predatory firm charges a
price below some measure of its incremental cost of production, in the
expectation that its less resilient competitor will not be able to sustain
losses, and will either exit or choose not to enter the market (the preda-
tion stage). In the second stage, which commences once the competitor
is forced out or deterred from entering the market, the predator in-
creases its price to a supra-competitive level, in the expectation of re-
covering its accumulated losses (the recoupment stage).
The feasibility of predation has been subject to contentious de-
bate.155 Chicago School economists argued that it is nearly impossible
for monopolistic predators to fully recoup the losses suffered, making
predation economically irrational.156 This argument rests on three cu-
mulative assumptions: that the predator cannot price discriminate (the
150
FTC v. Anheuser-Busch, Inc., 363 U.S. 536 (1960); Note, supra note 145, at 6.
151
EZRACHI & STUCKE, supra note 55, at 101.
152
Li, Xie & Feyler, supra note 29, at 3; Deng & Hernandez, supra note 25, at 38.
153
Julian Nowag & Thomas Cheng, Algorithmic Predation and Exclusion (2021),
https://ssrn.com/abstract=4003309.
154
Leslie, supra note 141; Nowag & Cheng, supra note 153, at 15.
155
Brooke Group, supra note 128.
156
John S. McGee, Predatory Price Cutting: The Standard Oil (N.J.) Case, 1 J.L. & ECON.
137, 140 (1958)(“If I am selling 90 percent of all petroleum, a particular competitor is selling
1 percent, and we both sell at the same price and have the same average cost, I lose $90 for
2023 29
similar price condition); that it must be able to supply the entire market
at the predatory price, including the increased demand due to the lower
price (the capacity condition); and that entry barriers are low, so that
once the monopolist raises its price, a competitor can profitably reenter
the market (the reentry condition).157
This skepticism has led courts to adopt a high threshold for preda-
tion, requiring proof of substantial market power;158 charging of a pred-
atory price, defined by the Supreme Court as “below an appropriate
measure of its rival’s costs,”159 and largely set to be below its average
marginal costs of production; and a reasonable prospect of recoupment
of losses.160 The presumed difficulty of recoupment has led to almost
no (successful) predation cases.161
Enter algorithms. As argued by Leslie,162 as well as by Cheng and
Nowag,163 algorithms can make it easier to recoup losses from preda-
tion. They do so by enabling better price discrimination, based on more
accurate personalized digital profiles of consumers.164 Indeed, algo-
rithms can overcome two of the three main conditions that form the
core of Chicago School's arguments. First, they can overcome the sim-
ilar-price condition. Algorithms may enable the predator to engage in
first-degree price discrimination, charging the exact price needed to re-
tain each individual consumer. This will potentially reduce the extent
of the price cut to some consumers. Successful predation, however,
may require only third-degree discrimination, distinguishing between
two main groups: marginal consumers, who are most likely to be en-
ticed by a competing firm’s product or low price, and infra-marginal
consumers, who are less likely to be tempted, whether due to rational
apathy, larger switching costs, behavioral limitations, or other reasons.
Only the marginal consumers need to be targeted and offered predatory
prices, so long as the firm can successfully prevent cross-sales between
the two groups. This, in turn, also partially overcomes the capacity con-
dition (i.e., that the seller must be able to supply the entire market).
Predictive and pricing algorithms therefore enable predatory firms to
respond to competitive threats in a selective manner.
every $1 he loses.”) Losses would be even higher, given that demand will be greater under a
predatory price.
157
Leslie, supra note 141, at 8.
158
Brooke Group, supra note 149, at 232.
159
Id., at 210.
160
Id., at 210, 226. The court affirmed the above conditions and extended them to bidding
claims. Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 127 S. Ct. 1069 (2007).
161
Leslie, supra note 141.
162
Id.
163
Nowag & Cheng, supra note 153.
164
Gautier, Ittoo & Van Cleynenbreugel, supra note 139, at 406-7.
As Nowag and Cheng argue, the use of such algorithms can pro-
vide an efficient low-cost tool for predation for several reasons. First,
as just discussed, predators need only cut prices for marginal consum-
ers. Second, the use of algorithms can help firms finance their predatory
actions by allowing them to maintain a profit-maximizing pricing
scheme for inframarginal consumers.165 Finally, by inflicting precise
and direct harm on competitors, algorithmic targeting can reduce the
duration of the first stage of the predatory scheme. All in all, algorithms
can increase the potential for recoupment.166
The third Chicago-school condition, easy reentry, may also be af-
fected by the digital ecosystem in which algorithms operate. There are
several ways this may occur; we shall mention two. In the first, the
predator’s product is characterized by significant network effects,
which arise when the value of a product to the user depends on the
number of other users. Large network effects, as are common with
some platform markets, lead to high entry barriers.167 As the district
court recognized in Uber Techs, the fact that many drivers and users
were already connected to Uber’s platform created substantial network
effects, increasing barriers to entry for competing platforms and
“provid[ing] a plausible means for Uber to recoup its losses from al-
leged predatory pricing.”168
In the second case, default contractual conditions, coupled with the
privacy paradox (the discrepancy between users’ intentions to protect
their privacy and how they actually behave online), could lead to first-
mover advantages in data collection.169 Here again Uber Techs can ex-
emplify the point.170 Uber’s predatory scheme relied heavily on its first-
mover advantage, which enabled it to accumulate a large dataset on in-
dividual riders’ habits (including not only basic ride data such as tim-
ings and locations, but more arcane information, such as when a certain
user is likely to cancel a ride). Powerful algorithms were then employed
to differentiate between marginal and inframarginal users.
165
Nowag & Cheng, supra note 153, at 15-6; CMA, supra note 3, at 8-10.
166
Nowag & Cheng, id.
167
Leslie, supra note 141, I at 34-35; SC Innovations, Inc. v. Uber Techs., Case No. 18-cv-
07440-JCS (N.D. Cal. May. 1, 2020).
168
Id., at 10. See also Riley Scott, Network Gridlock: An Analysis of Competition Regulation
in the Ridesharing Economy, 26 NZBLQ 83, 106 (2020).
169
See, e.g., STIGLER CTR. FOR THE STUDY OF THE ECON. & THE STATE, STIGLER COMM. ON
DIGIT. PLATFORMS: FINAL REPORT (2019), https://www.chicagobooth.edu/-/media/research/
stigler/pdfs/digital-platforms---committee-report---stigler-center.pdf.
170
Uber Techs, supra note 167.
2023 31
D. Supra-Competitive Selective Pricing
Selective pricing, in which a buyer offers a higher price to some

suppliers in an aggressive bid for an input, might simply be an indica-
tion of strong and healthy price competition. For example, a firm might
pay more to workers who have other offers and can thus more easily
switch jobs. Yet selective pricing might have anti-competitive exclu-
sionary effects if the buyer purposefully over-pays in order to limit the
availability of an essential input for its competitors, thereby raising its
rivals' costs.171 Supra-competitive selective pricing strategies are, to
some extent, the mirror image of traditional predatory pricing schemes,
except that they target suppliers of inputs, rather than consumers, and
involve supra-competitive prices, rather than below-cost prices.
Some factors may increase the profitability of such a scheme. For
instance, a monopolist with a relatively small number of suppliers may
find it easy to target marginal suppliers with prices that are not public
knowledge. Even in this case, however, the profitability potential might
be difficult, given that contracts with suppliers may be long-term or
involve substantial sums.
The legal prohibitions that apply to such conduct are based on those
regulating predation. In Weyerhauser, which involved overbuying tree
logs with the aim of raising a competitor’s costs in the upstream input
market, the Supreme Court held that predatory pricing and predatory
bidding are analytically similar, and that such similarities warrant an
identical liability standard.172 Applied in the predatory bidding context,
the plaintiff must prove that the bidding "caused the cost of the relevant
output to rise above the revenues generated in the sale of those outputs",
and that the bidder "has a dangerous probability of recouping the losses
incurred in bidding up input prices through the exercise of monopsony
power."173 Importantly for our discussion, the Court emphasized that
such a strategy is "rarely successful."174
Enter algorithms. Predictive algorithms, which increase the ability
to price-differentiate, raise the profitability of such a scheme. To illus-
trate, reconsider Uber Techs.175 Uber competed with other firms for the
services of car owners, to act as drivers via its platform. Some drivers
multi-homed: they also drove for Lyft, choosing their preferred plat-
form for each shift. Uber had a strong incentive to entice drivers to work
171
See, e.g., Thomas Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising
Rivals’ Costs to Achieve Power over Price, 96 YALE L. J. 209 (1986). Personalized rebates to
consumers, made easier by pricing algorithms, might achieve a similar result. See, e.g., Nowag
& Cheng, supra note 153, at 8.
172
See, e.g., Weyerhauser, supra note 160, at 1075.
173
Id.
174
Id, at 1077.
175
Uber Tech, supra note 167.
with it, one that was strengthened by the network effects at play: the
more drivers available, the better the service to users, and the more us-
ers would prefer to use Uber.176 At the same time, Uber had an interest
in minimizing the benefits it offered to drivers (and therefore its own
costs). Uber therefore devised an algorithmic-based program, termed
"Hell," in order to entice drivers to stop working with Lyft. The pro-
gram included three stages. In the first, Uber collected data on the con-
ditions under which each driver chose to drive for Lyft. In the second,
the algorithm identified drivers who drove for Lyft or had an incentive
to do so. In the third, the algorithm targeted those drivers and enticed
them with special offers to work for Uber.177 In particular, Uber “sen[t]
more riders to double-appers than to those who drove solely for Uber.
[And] would give them special bonuses for meeting a certain number
of rides per week.”178 This way, Uber used its superior data and algo-
rithms in order to target marginal drivers. Lyft, lacking access to an
equivalently detailed database, could not engage in similar conduct.179
In essence, this scheme raises rivals’ costs. As Anchustegui and Nowag
argue, such supra-competitive bonuses could have effects on both the
upstream and downstream markets in the form of exclusionary buyer
power exertion.180 Algorithms enable firms to engage in such conduct
much more efficiently, quickly, and at a lower cost.181
E. Exclusion by Limiting Interoperability
Algorithms can also limit the use by another firm of a dataset or a

service (such as a website). One way to do so is by limiting interopera-
bility between datasets or services. Interoperability refers to the ability
of different digital services to work together and communicate with
each other.182 Given that data synergies, as well as connections with
complementary or downstream services, are often a fundamental part
176
Nowag & Cheng, supra note 153, at 5.
177
Id., at 4.
178
Moon, Uber’s ‘Hell’ program tracked and targeted Lyft drivers, ENDGAGET.COM, April
13, 2017, https://www.engadget.com/2017/04/13/uberhell-program-lyft-drivers.
179
Nowag & Cheng, supra note 153, at 4-6.
180
Ignacio Herrera Anchustegui & Julian Nowag, Buyer Power in the Big Data and Algo-
rithm-Driven World: The Uber and Lyft Example, COMP. POL'Y INT'L (2022), at 2.
181
Recently, the South Korean Fair Trade Commission sanctioned a similar result which was
achieved by a self-preferencing algorithm. The Commission imposed a corrective order and
a fine on a Korean taxi app, for designing its algorithms to assign better and more drives to
its member taxi drivers, relative to non-member drivers, in order to incentivize the latter to
join as members. OECD, Algorithmic Competition, supra note 10, at 17.
182
OECD, COMPETITION COMMITTEE DISCUSSION PAPER, DATA PORTABILITY,
INTEROPERABILITY AND DIGITAL PLATFORM COMPETITION 328, 332 (2021),
https://www.oecd.org/daf/competition/data-portability-interoperability-and-digital-platform-
competition-2021.pdf;, at 12.
2023 33
of a firm’s value creation, artificially limiting complementary function-

ality between different datasets or services could significantly raise bar-
riers for rivals.183 Limiting interoperability may be especially profitable
when a firm might otherwise be mandated to provide access to its da-
taset or service against its wish, or where it can set the standard for
interoperability in the relevant industry in a way that raises the costs
incurred by the firm's rivals.
In extreme situations, limiting interoperability could amount to an
illegal refusal to deal (especially when the dataset or service is an es-
sential facility for competition). Alternatively, it could be treated as a
means for implementing a bundling strategy.184
Enter algorithms. A trade-term-setting or data-organizing algo-
rithm can be used, for example, to rapidly or cheaply organize a dataset
so as to raise rivals' costs. A predictive algorithm can determine which
organization of a dataset or a website would raise rivals' prices. More-
over, algorithmic sophistication might make it more difficult to detect
such conduct. This may be the case even with algorithmic transparency,
if the organization of the dataset is autonomously determined by the
algorithm as part of a general goal of profit maximization.
3. Implications for Merger Review
To this point, we have established that algorithms can affect market

power and unilateral conduct in ways that cannot always be remedied
by market forces alone. This is especially true when firms compete in
the digital sphere, given the speed and quality of communications and
the height of entry barriers in some digital markets. Non-merger anti-
trust tools often do not efficiently address the concerns raised. Some do
not apply to the harmful conduct. Others are based on economic as-
sumptions regarding market conditions that are not sufficiently sensi-
tive to algorithmic decision-making. Table 2 summarizes these
findings.
Type of conduct Effects of algo- Captured under

rithms and data other prohibitions
183
Id.
184
OECD, Data Interoperability, supra note 182, at 28-9; U.S. v. Microsoft Corp., Civil Ac-
tion No. 98-1232 (Antitrust), Complaint, 18 May 1998, https://www.justice.gov/atr/com-
plaint-us-v-microsoft-corp; U.S. v. Microsoft Corp., Civil Action No. 98-1232, United States
District Court for the District of Columbia, Findings of Fact, 5 November 1999,
https://www.justice.gov/atr/us-v-microsoft-courts-findings-fact#vb/. U.S. v. Microsoft Corp.,
Civil Action No. 98-1232, United States District Court for the District of Columbia, Final
Judgment, 12 November 2002, https://www.justice.gov/atr/case-document/final-judgment-
133 (finding, inter alia, that Microsoft monopolized its market by delaying provision of a
crucial application programming interface to Netscape).
High prices More precise maxi- No

mal levels
Predation Increasing probabil- Yes, but a very high
ity of recoupment standard
Discrimination Better differentiation Partially
among consumers
Selective pricing Differentiation used Yes, but a very high
to increase rivals' standard
costs
Limiting interopera- Organizing the da- Yes, but a very high
bility taset or the service; standard
calculating the best
strategy to raise ri-
vals' costs
Table 2: The effects of AI on unilateral conduct and the availability

of non-merger tools to deal with them.
The increased risk of unilateral exploitative or exclusionary conduct

brought about by algorithms should be translated into merger policy.
We offer some suggestions.
To begin, it is important to differentiate between mergers involv-
ing algorithms that strengthen market power, and those that strengthen
the ability to (ab)use such power and harm welfare. Some mergers in-
volve both effects. To date, most studies and merger decisions that in-
volved data and algorithms have focused on the first type of effect —
the creation of a significant comparative advantage, whether by way of
dataset synergies,185 increased analytical capabilities,186 foreclosure of
access to an essential dataset or algorithm by actual or potential com-
petitors,187 or the elimination of a competitor.188 For instance, some ar-
gue that the Facebook/Instagram merger189 was motivated by
185
See, e.g., Press Release, FTC Closes its Investigation into Facebook's Proposed Acquisition
of Instagram, Inc, August 22, 2012; OECD, Business and Finance Outlook 2021: AI in Busi-
ness and Finance (2021), https://www.oecd-ilibrary.org/sites/3acbe1cd-en/in-
dex.html?itemId=/content/component/3acbe1cd-en.
186
See, e.g. Chirita, supra note 43, at 152, citing to COMP/M 7023, Publicis/Omnicom (Jan.
9, 2014), paras 11 and 619)(both parties had data analytics capabilities).
187
See, e.g., Case M.8124 Microsoft/LinkedIn (Dec. 6, 2016, Eur. Comm'n), https://ec.eu-
ropa.eu/competition/mergers/cases/decisions/m8124_1349_5.pdf recital 246 et seq.
(LinkedIn's data could not be qualified as important input with respect to machine learning in
consumer management relationship algorithms).
188
See, e.g., Chirita, supra note 43; Case M/5727 Microsoft/Yahoo Search Business (Feb. 18,
2010), recitals 111 and 140, https://ec.europa.eu/competition/mergers/cases/deci-
sions/M5727_20100218_20310_261202_EN.pdf (the estimated capital expenditure to enter
the market also included several billion dollars to develop and update the algorithm).
189
Facebook/Instagram, supra note 185.
2023 35
Facebook's wish to gain control of Instagram's much more efficient al-

gorithm for uploading high quality pictures. Here we focus mainly on
the second type of mergers — those that use algorithms to increase the
ability of the merging parties to engage in unilateral conduct, whether
exploitative or exclusionary.
Algorithms affect both the factual and the counter-factual. Three
main questions need to be answered in each case. First, will the increase
in unilateral conduct occur regardless of the merger? As noted, the
increased analytical and predictive powers of algorithms could enable
firms to engage in monopolistic competition under a wide set of cir-
cumstances. This possibility is strengthened by market failures in the
digital economy that erect access barriers, including consumer rational
apathy, network effects, and lock-ins.190 Under such conditions, algo-
rithms may allow firms to identify more opportunities for unilateral ex-
ploitation. The better the ability of firms to engage in such conduct
regardless of a merger, the lower the effects of algorithms on the mer-
ger. To illustrate, in the Priceline/Kayak merger the British Office of
Fair Trading rejected an argument that the merger would enable Price-
line to use Kayak's algorithm to automate detection of rate parity devi-
ations. This was because more effective technology for parity checks
already existed in the market and was available to Priceline, regardless
of the merger.191
The second question is how the merger affects the ability of firms
to engage in unilateral conduct. Algorithms might be the focus of the
merger, or the merger might simply create conditions that strengthen
the ability of firms to increase their profits by using algorithms. A key
issue relates to how the merger affects the control of resources neces-
sary to engage in unilateral conduct. Take, for example, possible acts
of predation or discrimination. Control of datasets on consumer profiles
that enable algorithms to better detect different consumer WTPs is a
basic condition of such conduct. The control of such datasets can also
heighten entry barriers, if competing firms cannot easily predict which
consumers are more likely to be targeted and enticed by their rival.192
Consider, for instance, the Live Nation/Ticketmaster merger, which
was approved in 2010.193 The merging parties had unique datasets on
concertgoers' purchase histories. This enabled them to train their algo-
rithms to customize advertisements for future events, a task no other
competitor could do as efficiently.194 The acquisition thus consolidated
and entrenched Live Nation's market power. Control of algorithms with
190
See, e.g., Stigler Center, supra note 39.
191
Lear, Ex-post Assessment of Merger Control Decisions in Digital Markets, Final Report
(May 9, 2019), at 88, 90, 102.
192
Leslie, supra note 141, at 31.
193
Miller, supra note 43, at 341.
194
Id., at 341-2.
stronger analytical capabilities to extract information from the dataset,

or create such information with less data, could create similar effects.
Merger review authorities should consider the difficulty of per-
forming tasks without algorithms or to obtain an algorithm with similar
analytical capabilities; how such capabilities affect comparative ad-
vantages; and whether the merger affects the ability to use these algo-
rithms. To illustrate, in the TomTom/TeleAtlas merger, where the
merging entities operated in the markets for navigation software and
navigable digital map datasets respectively, it was found that switching
costs for using datasets supplied by competing providers in different
formats were not prohibitive.195 Accordingly, competitors could still
use their algorithms on different datasets, even if access to TeleAtlas’s
maps was foreclosed. Another important resource involves the control
of a platform that reduces transaction costs and enables targeting final
consumers rather than intermediate suppliers. Accordingly, merger pol-
icy should detect mergers that supply firms with resources that enable
algorithmic-run exploitative or exclusionary schemes.
Merger enforcers should be sensitive to the fact that, due to transfer
learning, an algorithm created for or incorporating learning from a spe-
cific use or context might also be used in a different context. Such a
market need not be horizontally or vertically connected to the one in
which the acquiring firm operates. For instance, an algorithm trained to
recognize facial expressions as an indicator of emotional responses to
advertising could be repurposed to assess the suitability of candidates
in video job interviews. Accordingly, the focus should be on the func-
tionality of the algorithm, rather than its current use. Or to take another
example, Amazon’s acquisition of iRobot, a producer of autonomous
home cleaning devices, provided Amazon with the spatial content or-
ganizing tool (e.g., how to recognize a room and know how it is orga-
nized) relevant for developing hubs for devices that seamlessly react to
different conditions in a smart home (e.g., knowing to turn the light on
when someone enters a room).196
Furthermore, given that the use of algorithms is exponentially
growing, we suggest that more weight be given to the potential use of
algorithms over a longer period than is currently used in merger anal-
yses. The fact that merging parties do not currently employ certain al-
gorithms should not be a decisive factor. Rather, the analysis should
relate to how the change in market conditions increases the benefits to
195
TomTom/Tele Atlas, supra note 41, recitals 20, 99; European Commission, COMP
M. 8124, Microsoft/LinkedIn, Dec. 6, 2016, recital 250 (Uncertainty regarding the success of
the analytical service provided by LinkedIn's algorithm was used to justify approval of the
merger).
196
Evan Ackerman, Can Amazon Build a Home Robot That Is Useful and Affordable? IEEE
SPECTRUM, April 24, 2018, https://spectrum.ieee.org/amazon-home-robots.
2023 37
the merging parties from the potential use of algorithms in the fore-
seeable future. Otherwise, merging parties might wait until after the
merger to employ algorithms, or the analysis might not initially capture
all foreseeable effects.197 To illustrate, consider a twist on the proposed
Staples/Office Depot merger, which was abandoned in 2016 after a dis-
trict court granted a preliminary injunction.198 Both companies are pur-
veyors of office supplies. According to the FTC analysis, the major
competitive concern arising from the proposed merger related to a seg-
ment of the market comprising large companies that purchase office
supplies for their own use, and that contract with a single vendor to
consolidate their purchases and negotiate better terms. The merging
parties were the only two office supply vendors that could provide on
their own the nationwide distribution of the products and services in the
specific combinations required by many large customers. Accordingly,
the merger would create a B-to-B market dominated by one large sup-
plier. At the same time, the FTC found that other consumers would not
be harmed by the merger.199
Yet some of the same market dynamics that led the FTC to identify
the large customers segment as a separate consumer group might also
arise with regard to small consumers who shop online. Assume that the
newly combined dataset of the merging parties may enable pricing al-
gorithms used by the merged entity to better identify different consum-
ers' WTP. Some might prefer to assemble their preferred cluster of
office supplies from a supplier of a wide range of products that includes
specific brands. Just as for large business entities, the merged entity
would be the dominant supplier for these consumers. This concern is
strengthened where some products in the cluster are not available from
other competitors; where only some products in the cluster are priced
higher than comparable alternatives, making it more difficult for the
consumer to compare overall offers; where consumers prefer not to
multi-home; or when the online setting makes it easier for the merged
entity to charge different prices from different consumers. The same
result could arise if the merger removes from the market the only rival
that has a sufficiently large dataset to make targeted counteroffers.
The foreseeable ability of incumbent or potential rivals to use al-
gorithms to increase competition in a market dominated by a monopo-
list should also be considered. As studies have shown, algorithms can
197
In the Google/DoubleClick merger, the effects of the emerging technology of behavioral
targeting algorithms were not considered, because neither of the parties had yet developed
such technology at the time of the merger. Lear, supra note 191, at 39, analyzing Case M.4731
– Google/DoubleClick, March 11, 2008.
198
Federal Trade Commission v. Staples, Inc. and Office Depot, Inc. 190 F. Supp. 100 (2016).
199
Id.
disrupt long-standing market equilibriums.200 They can be the basis of

disruptive innovation that results in new or improved products; reduce
costs through improved production processes; reduce barriers to entry
by allowing smaller new entrants to gain market insights or develop
new disruptive products at lower cost; reduce customer search costs;
and better balance supply and demand, reducing redundant invento-
ries.201 One recent example involves Microsoft's acquisition of
OpenAI. The merger enabled OpenAI to gain access to the storage ca-
pacity necessary in order to operate its generative AI, ChatGPT, which,
in turn, challenged Google's long-standing dominance in the search
market.202
Furthermore, as in the case of coordinated conduct, the analysis
should also account for the operation or the increased potential of algo-
rithms to act as counterweights to unilateral conduct. Consider three
scenarios. In the first, consumers use algorithms to make their pur-
chases, thereby increasing the possibility of creating an automatic and
efficient buying group.203 Such buying groups, in turn, can obscure the
WTP of each consumer and create countervailing buyer power. In the
second, current or potential rivals make more use of algorithms to de-
tect market segments in which competition is reduced. In the third, ri-
vals—or even governmental authorities—use algorithms to provide
accurate and timely information that compares options in the market or
provides other types of information that might affect consumers' WTP
(such as a comparison of the price of a similar good sold by the monop-
olist in different locations; or changes in the monopolist's price over
time).204
Antitrust authorities should also explore whether the change
brought about by the merger might enable third parties to manipulate
the algorithms used by the monopolist in a way that harms competition
and consumers. To illustrate, assume that a ranking algorithm can po-
tentially be manipulated by competitors to reduce a rival's ranking. The
more the merger strengthens the market power of the firm operating the
ranking algorithm, the more effective such manipulation will be.205
The third question relates to a systemic risk: how more wide-
spread unilateral conduct should affect merger review. Assume that
200
OECD, Algorithmic Competition, supra note 10, at 8.
201
Id.
202
Thibault Schrepel, Competition is One Prompt Away, Network Law Review, Feb. 17,
2023, https://www.networklawreview.org/bing-chatgpt/.
203
Gal & Elkin-Koren, supra note 121.
204
For the effects of consumers' notions of fairness on their WTP see, e.g., Daniel Kahneman,
Jack L. Knetsch & Richard Thaler, Fairness as a Constraint on Profit Seeking: Entitlements
in the Market, 76(4) AM. ECON. REV. 728 (1986).
205
Blickstein-Schory & Gal, supra note 134.
2023 39
algorithms increase the prevalence of discriminatory prices. The litera-

ture on discrimination generally focuses on its effects on the market in
which it occurs and/or the market of the discriminator. Yet discrimina-
tion—especially if it becomes widespread—also creates externalities
that are not horizontally or vertically connected to the discriminator.206
For instance, assume that the supplier of a certain drug for which de-
mand is inelastic sets personalized prices that allow the supplier to en-
joy the full trade surplus. The greater the number of products that are
sold at the maximal price the consumer is willing to pay, the lower the
consumer's ability to buy other products. This, in turn, could affect the
motivation of suppliers to invest in entry, expansion, or research and
development in other markets.207
It is noteworthy that the use of algorithms—in particular the in-
creased ability to charge personalized prices—may have wider socio-
political implications, such as on social inequality. Yet the direction of
such effects is not straightforward. There is no obvious correlation be-
tween the wealth of consumers, the prices they are willing to pay, or
their ability to employ counter-algorithms that would reduce the ability
of suppliers to price discriminate. An evaluation of whether and under
what circumstances the use of algorithms might lower social inequality,
as well as whether and how antitrust authorities should consider such
effects, is beyond the scope of this paper.
Algorithms also magnify some of the inherent dilemmas in mer-
ger review. To illustrate, consider supra-competitive prices that are not
exclusionary. While many jurisdictions outside the U.S. prohibit exces-
sive prices as abuse of a dominant position, U.S. antitrust law takes a
different tack.208 In the U.S., high prices, in and of themselves, do not
infringe antitrust laws.209 Accordingly, merger review is the only tool
that can tackle unilateral market power not resulting from exclusionary
206
Currently such effects are indirectly accounted for in the WTP.
207
Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407
(2004)(“[M]ere possession of monopoly power, and the concomitant charging of monopoly
prices…is an important element of the free-market system. The opportunity to charge monop-
oly prices – at least for a short period – is what attracts ‘business acumen’ in the first place; it
induces risk taking that produces innovation and economic growth”).
208
See, e.g., OECD, Roundtable on Excessive Pricing, DAF/COMP 2011 (2011). While such
prohibitions are not often used, they are applied in cases of extreme price rises, most often in
the pharmaceutical industry. OECD, Background Paper, Excessive Prices in the Pharmaceu-
tical Markets (2018). For a suggestion to regulate high prices through Section 5 of the FTC
Act see Harry First, Excessive Drug Pricing as an Antitrust Violation, 82 Antitrust L. J. 701
(2019). For a different view within the US see Gregory J. Werden, Exploitative abuse of a
dominant position: A bad idea that now should be abandoned (2021), https://pa-
pers.ssrn.com/sol3/papers.cfm?abstract_id=3790472.
209
Verizon, supra note 207, at 407 (“Charging of monopoly prices, is not only not unlawful;
it is an important element of the free-market system. The opportunity to charge monopoly
prices – at least for a short period – is what attracts ‘business acumen’ in the first place; it
induces risk taking that produces innovation and economic growth").
conduct. While merger review only kicks into action once a merger is
proposed, it may serve as the last resort against unilateral high prices.
Algorithms sharpen the need to determine when high prices should be
seen as motivating investments that increase productive and dynamic
efficiency.210 If a firm invests in an algorithm that enables it to better
predict market trends and thus meet the needs of consumers, but the
same algorithm also enables it to set higher product prices, a balancing
of such effects will be required. The potential change in the prevalence
and level of prices, brought about by algorithms, highlights the di-
lemma.
In this vein, algorithms are also likely to make the balancing be-
tween a merger's pro and anti-competitive effects more difficult. Often,
the same algorithm, or a combination of algorithms, can be used in a
manner that furthers both effects. This may be the case, for example,
where an algorithm's stronger powers to predict market trends can
strengthen a firm's ability both to meet evolving consumer demand,211
to identify which (potential) rivals it might want to target with higher
entry barriers.
Algorithms can also be expected to affect some of the economic
tests used to define relevant markets. As explained by Li, Xie, and
Feyler, many of the economic tests that are traditionally used for as-
sessing market power and defining markets are based on existing
prices. One example is the Small but Significant and Non-Transitory
Increase in Price (SSNIP) test, which measures market power and sub-
stitutability.212 Such a test might not be suitable for markets in which
prices are not homogenous and are constantly changing. Indeed, some
have suggested that antitrust authorities should thus focus on theories
of harm, rather than on precise market definitions.213
Algorithms could also affect intervention thresholds. Consider
three examples. In the first, algorithms affect the scope of the affected
market, thereby potentially reducing the efficient thresholds for merger
analysis. This argument was raised by McSweeny and O'Dea: where
sophisticated algorithms can segment a market into more granular con-
sumer groups based on different levels of WTP, the relevant antitrust
markets might be narrower.214 Accordingly, harm might be caused in
market segments that are not visible in the framework of a traditional,
non-algorithmic, setting. Deng and Hernandez suggest that as part of
the merger review it would be useful to identify categorical cases and
210
See, e.g., Michal S. Gal, The Case for Limiting Private Excessive Pricing Litigation, 15(2-
3) J. OF COMP. L. & ECON. 298 (2019).
211
See, e.g., OECD, Outlook 2021, supra note 185, section 4.2.2.
212
Li, Xie & Feyler, supra note 29, at 3.
213
CRÉMER ET AL., supra note 36, at 45.
214
McSweeny & O'dea, supra note 138.
2023 41
rank them from less to more competitive to prioritize areas of con-

cern.215 In the second example, a predictive algorithm that was trained
on market trends is used to identify at an early stage rivals that pose a
high potential threat, which the firm can then attempt to neutralize
through a merger. This tactic was used by Facebook. It bought a startup
firm which had developed an efficient trend-detecting algorithm, and
then used that algorithm to inform subsequent merger proposals.216 At
the time of the merger, the acquired firm might be a nascent competitor,
or too small to be captured under merger notification thresholds. Fi-
nally, algorithms can affect intervention thresholds indirectly. Where
changes in the control of data—to be used by algorithms—may create
market power, current proxies of monopoly power, such as market
shares and short-term effects on prices, may be ineffective.217 To ad-
dress such scenarios, regulators may need to add AI-related triggers for
further investigation.218
Algorithms may also help antitrust authorities simulate merger ef-
fects. These authorities might even use the merging parties' algorithms,
thereby allowing for the study of more realistic scenarios.219 To illus-
trate, in the Amazon/The Book Depository merger the features used by
the parties' algorithms were scrutinized to determine whether the par-
ties viewed themselves as competitors. The British antitrust authority
based its decision, in part, on the outcome of the pricing algorithms
used by Amazon.220 Including the Book Depository in the pricing algo-
rithm for long-tail titles was not a profit-maximizing strategy for Ama-
zon. The authority thus concluded that the two parties' influence on
each other's pricing behavior had been more a result of algorithmic
price setting rather than of market-based competitive constraints.221 Al-
gorithmic simulations may also be used to indicate whether the merged
215
Deng & Hernandez, supra note 25, at 37.
216
AUTORIDADE DA CONCORRENCIA, DIGITAL ECOSYSTEMS, BIG DATA AND ALGORITHMS,
87 (2019), https://www.concorrencia.pt/sites/default/files/processos/epr/Digital%20Ecosy
tems%2C%20Big%20Data%20and%20Algorithms%20-%20Issues%20Paper.pdf; Federal
Trade Commission v. Facebook, Inc., Complaint for Injunctive and Other Equitable Relief
(Case No. 1:20-cv-03590. D.C. Cir.), https://www.ftc.gov/system/files/docu-
ments/cases/051_2021.01.21_revised_partially_redacted_complaint.pdf .
217
Robert Zev Mahari, Sandro Claudio Lera & Alex Pentland, Time for a New Antitrust Era:
Refocusing Antitrust Law to Invigorate Competition in the 21 st Century, 1 STANFORD
COMPUTATIONAL ANTITRUST 52, 54 (2021).
218
Mahari, Lera and Petland take this one step further, arguing for per se presumptions of
anticompetitive effects. Id.
219
Deng & Hernandez, supra note 25, at 38 (it might be necessary to modify the algorithm to
maximize the joint post-merger payoff).
220
UK Office of Fair Trading, ME/5085/11, Anticipated Acquisition by Amazon.com Inc. of
the Book Depository Intl. Ltd. (14 Dec. 2011), https://assets.publishing.service.gov.uk/me-
dia/555de319e5274a708400006e/Amazon.pdf,, recitals 51-72.
221
Id., recital 72.
firm would have a motivation to change its algorithm.222 Furthermore,

as Deng and Hernandez note, partial validation of the usefulness of the
pricing algorithm in predicting post-merger price changes can be ob-
tained by examining the empirical relationship between actual prices
and the algorithmic pricing recommendations.223 Conducting such sim-
ulations internally may also enable the merging parties to understand
the potential antitrust risks and to address likely concerns.224
As a side note, the use of predictive algorithms, which provide
more sophisticated analyses of how markets will likely develop and the
firms that pose the greatest threat to the current status quo,225 raises the
issue of what weight competition authorities should give to such pre-
dictions in their own counterfactual merger analysis, if at all; and
whether firms seeking to merge should be required to expose their use
of a predictive algorithm as well as the data on which it was trained and
is used. The answer should be based in part on the firm's motivation for
using such algorithms and the ability to audit algorithms without access
to them.
Merger review should also account for the interplay between the
different prohibitions included in the antitrust laws. For instance, the
increased use of algorithms should cause antitrust authorities and courts
to avoid the assumption that below-cost pricing will almost always ben-
efit consumers. Until this tendency is overcome, merger review may
have an important role to play in counteracting the market conditions
that may enable and strengthen the profitability of predation. Likewise,
merger review may play an important role in cases where questions re-
garding the intent of firms using autonomous pricing algorithms remain
unanswered.
The characteristics of algorithms may also be used as part of a rem-
edy in merger review. Consider five examples. In the first, authorities
or courts may condition a merger on one party, whose comparative ad-
vantage derives in part from a predictive algorithm, selling or sharing
that algorithm with a rival.226 Interestingly, the non-rivalrous character
of the algorithm determines the effects of such a remedy on market dy-
namics: in contrast to a physical good, use of the algorithm by a rival
does not limit its use by its creator. Therefore, unless the use of the
algorithm by its creator can be limited in some way, the algorithm can
222
Deng & Hernandez, supra note 25, at 39.
223
Id., at 38.
224
Id. For such as example, see Pauline Affeldt, EU Merger Policy Predictability Using Ran-
dom Forests (DWI Berlin Discussion Paper, 2019), https://d-nb.info/1185490302/34.
225
The Portuguese Competition Authority acknowledged such a use: AUTORIDADE DA
CONCORRENCIA, supra note 216, para. 162.
226
For essential algorithms see Michal S. Gal and Nicolas Petit, Radical Remedies for the
Digital Economy, 36(2) BERKELEY TECH. L. J. 617 (2022)
2023 43
at most be used to level the playing field.227 Furthermore, such a rem-

edy would only be useful if the competitor has the other resources nec-
essary to employ the algorithm, such as the relevant data. Yet, as argued
by Gal and Petit, if the algorithm incorporates previous learning, it may
be sufficient to apply it to new data, without the need to control the
dataset on which it was trained.228
In the second example, approval of the merger is conditioned on
the use of certain algorithms by the merged entity. This can be exem-
plified by the Uber/Grab merger decision in Singapore.229 The merging
parties were the two closest and largest competitors in the ride-hailing
platform market. Both used dynamic decision-making algorithms to
calculate prices. Prior to the merger they were aggressive in providing
incentive schemes for drives and promotions for riders. After the mer-
ger, effective fares rose by 10-15%. The merger was unnotified, but it
was determined that the parties should have applied a self-assessment
that would have led to their abandoning the merger. Since dissolving
the merger would have been difficult, the merged entity was mandated
to maintain its pre-merger algorithmic pricing matrix, so as to artifi-
cially maintain pre-merger price levels.230
In the third example, merger conditions ensure access to the re-
sources that enable algorithms to operate. This is exemplified by the
IMS Health/Cegedim Business merger.231 IMS sells tracking data to
pharmaceutical companies. Algorithms are used to organize this data
on the basis of a unique geographical segmentation created by the com-
pany, known as the “brick structure.” Because the overwhelming ma-
jority of pharmaceutical companies had bought IMS’s data and wanted
their other products and services to be interoperable, the brick structure
of dataset organization became the de facto standard for the provision
of healthcare professional software to pharmaceutical companies—in-
cluding customer relationship management (CRM) software, which
uses algorithms to aggregate, match, consolidate, verify, and analyze
data.232 Given Cegedim’s share in the CRM software market, the mer-
ger raised serious concerns that the merged entity could foreclose ac-
cess to the brick structure to other CRM software providers.233 The
227
Id.
228
Id.
229
Contribution from Singapore, OECD, Merger Control in Dynamic Markets, Nov. 27, 2019,
DAF/COMP/GF/WD(2019)29, section 3.
230
Id.
231
EU Commission, COMP/M 7337, IMS Health/Cegedim Business, 19 Dec. 2014, paras. 9
– 24, 26, 49, 99, 105.
232
Id., recital 21.
233
Id., recital 245-6, 255, 257
merger was approved subject to an access commitment to the "brick

structure."234
In the fourth example, merger conditions ensure that specific fea-
tures used by the algorithm to make its decisions will not create artifi-
cial barriers to entry. To illustrate, reconsider the Priceline/Kayak
merger noted above.235 Priceline operates an online travel agency.
Kayak operates a meta-search site, allowing users to compare prices for
travel services. It then refers users to travel websites where users can
complete their bookings. Kayak's algorithm ranked the offers of differ-
ent travel agencies based on price, users' preferences, and the revenues
that would accrue to Kayak should the user accept that offer. One po-
tential concern was that the merger would create an incentive to fore-
close rivals by biasing search results in favor of the merged entity (self-
preferencing).236 This theory of harm was rejected, since many users
multi-home, and Kayak had many competitors.237 For purposes of dis-
cussion, assume this was not the case, and that self-referencing is con-
sidered to be harmful where consumers are locked-in. If there were
strong efficiency justifications for this merger, it could have been ap-
proved, subject to a condition prohibiting the merged entity from self-
preferencing. Given that decisions are made by an algorithm, proof of
noncompliance in that case might be easier, since computer and data
scientists can, in theory, potentially test the algorithm to detect the
weight given to different features. In the fifth example, AI can be used
to expand the tools available to regulators for the auditing of data use,
to ensure compliance with restrictions. To illustrate, Mahari, Lera, and
Pentland suggest that by using new AI techniques such as federated
learning,238 a data trust could be created to control data and allow out-
side entities to derive insights without having to view the raw data.239
Mandating the creation of such a mechanism might reduce the need for
stricter structural remedies.
Finally, the fact that merger policy is effects-based overcomes ob-
stacles to applying prohibitions that condition regulatory action on the
intent of the market player increases the usefulness of merger review
relative to other antitrust tools. This is because determining who in-
tended the anti-competitive outcome, especially where the decisions
were autonomously made by the algorithm, might be challenging.240
This is true, of course, in the case of collusion as well.
234
Id., recital 267.
235
Priceline/Kayak, supra note 30; Lear, supra note 191, at 87.
236
Lear, id., at 88.
237
Id.
238
A machine learning technique that allows insights to be drawn from data without access to
the raw data itself. See generally Keith Bonawitz et al., Towards Federated Learning at Scale:
System Design (2019), https://arxiv.org/pdf/1902.01046.pdf
239
Mahari, Lera, and Pentland, supra note 217, at 10-1.
240
Gal, Illegal Agreements, supra note 1.
2023 45
V. INSTITUTIONAL RECOMMENDATIONS
Our conclusions in the previous parts also lead to some institutional

recommendations. The first relates to funding. Over the long run, it is
not clear whether making merger analysis tools more sensitive to algo-
rithmic coordination will increase or decrease the cost of merger re-
view. The former will be the case if the potential for algorithmic
decisions under different market conditions calls for more complicated
and resource-intensive case-by-case analyses, while the latter will be
true if it emerges that preventing mergers will be ineffective in many
markets, limiting the usefulness of in-depth investigations. Nonethe-
less, in the short run, we see a need for increased funding, so that au-
thorities and scholars can study algorithms’ effects on markets and
mergers, and develop the technological and institutional capabilities
needed to address them. Understanding both the benefits and costs of
algorithms, as well as the market dynamics created by them, is both a
challenge and an opportunity to fit merger policy to evolving market
realities. Authorities must learn to identify which potential harms and
benefits are relevant, and to design measurements for them. AI can as-
sist in this regard. Given sufficient relevant data (such as firms' reac-
tions to changing market conditions, their organizational and dynamic
capabilities, etc.), AI can potentially identify and create predictions that
go beyond current models, assessing the likely evolutionary paths of
incumbents and new entrants. This is especially useful given that the
same algorithm can have totally different effects in different settings.
Second, developing the analytical tools needed to identify which
mergers involving algorithms are likely to harm welfare requires ex-
pertise in computer and data sciences.241 With respect to U.S. policy,
we suggest that the DOJ and the FTC create interdisciplinary intra-
agency or even inter-agency working groups for the purposes of an-
ticipating and evaluating future mergers.242 These groups should be
able to evaluate in a timely fashion mergers that involve algorithms
used by market participants, to determine whether they are likely to in-
crease or decrease market complexity, transparency, exploitation, ex-
clusionary conduct, and coordination. These groups can also further the
development of computational antitrust—a nascent but rapidly growing
field that uses AI tools to analyze market dynamics in antitrust enforce-
ment.243 AI can be used to develop better predictive models, and to au-
dit algorithms to help determine the variables that might be most
241
OECD, Algorithmic Competition, supra note 10, at 30.
242
See, e.g., CMA Report, supra note 3, at 42-50.
243
See, e.g., Stanford Computational Antitrust, The Adoption of Computational Antitrust by
Agencies: 2021 Report (Thibault Schrepel & Teodora Groza ed., 2022); Anthony J. Casey
&Anthony Niblett, Micro-Directives and Computational Merger Review, 1 STANFORD
relevant for an analysis, making data collection more focused and more
efficient.244 AI simulations can also assist regulators in predicting how
market participants are likely to react to changes in the focus of regula-
tion.245 Given the growing sophistication of AI tools, they can be used
to create more complicated yet realistic models of long-term market
dynamics. The cross-border nature of many cases involving algorithms,
as well as the commonality of issues where algorithms are involved,
imply that antitrust authorities can benefit from collaboration and shar-
ing of expertise with other regulators (including financial regulators
and antitrust authorities in other jurisdictions) that are grappling with
similar issues.246
From a procedural point of view, conditional on the protection of
privacy and trade secrets, it might be useful to require the merging ap-
plicants to provide information relating to their datasets, algo-
rithms, and the infrastructure necessary to use them, in order to make
auditing more effective. To illustrate, when investigating claims of col-
lusion through algorithms by four major airlines, the Brazilian compe-
tition authority requested companies to provide information about
whether they collected data on prices and quantities offered from other
competitors, used machine learning to process the collected data, dele-
gated their pricing process to some degree, and had a team specialized
in data analysis.247 This is another benefit of merger review over ex-
post regulation.248 While some auditing techniques can be applied with-
out access to the algorithm or the data on which it was trained or used,
in many cases it would make it impossible or much more difficult.249 In
such cases, algorithmic and dataset transparency to antitrust authorities
could be useful. The analysis of such resources by computer and data
scientists – whether by manually inspecting the code, testing it with
different datasets, or testing how the alteration of a certain feature af-
fects its outcome – would allow regulators to gain more information
COMPUTATIONAL REVIEW 133, 133 (2021)(using AI to correct for both over and under inclu-
siveness in merger review).
244
Id.
245
For an overview of some computational tools see, e.g., Nicolas Petit and Thibault Schrepel,
Complexity-Minded Antitrust, JOURNAL OF EVOLUTIONARY ECONOMICS (forthcoming,
2023), https://ssrn.com/abstract=4050536.
246
Id., at 5.
247
Algorithmic Competition- Note by Brazil, DAF/COMP/WD(2023)18 (2023), at 4,
https://one.oecd.org/document/DAF/COMP/WD(2023)18/en/pdf.
248
For the difficulties involved in reverse engineering of algorithms, emulating web applica-
tions, or intercepting algorithmic output, see, e.g., Chen, Mislove, & Wilson, supra note 141.
249
OECD, Algorithmic Competition, supra note 10, at 27. The investigation of the Danish
competition authority into the use of Google's algorithm was not based on the algorithm's
source code, but rather on click and use data. Algorithmic Competition - Note by Denmark,
DAF/COMP/WD(2023)8 at para. 29-37, https://one.oecd.org/docu-
ment/DAF/COMP/WD(2023)8/en/pdf.
2023 47
about likely outcomes and remedies.250 Yet, especially in the case of AI

algorithms, regulators should be aware that algorithms can change sig-
nificantly over time.
Auditing algorithms, as well as techniques to increase the level of
explainability of algorithmic decisions, can also assist antitrust author-
ities in their task. The availability, ease of employment, and precision
of such tools, in turn, can affect the required level of proof in merger
decisions. Consider the following example. An algorithm employed by
a market player is non-transparent. Yet its decisions (output) under dif-
ferent market conditions (inputs) can be observed and tested. Based on
such data, computer scientists can potentially build an algorithm that
provides similar outputs when given similar inputs (reverse engineer-
ing). The constructed algorithm can then be tested to determine whether
it engages in a certain conduct (such as personalized pricing), and how
it may affect market dynamics under different conditions. Should the
constructed algorithm be shown to harm consumer welfare, the burden
of proof might then shift to the supplier using the original algorithm to
prove the contrary. We note in passing that should the use of algorithms
by antitrust authorities make it easier to detect unilateral or coordinated
anticompetitive conduct, once it occurs, there will be less need to pro-
hibit mergers as a precaution.
Mergers involving data and algorithms often raise data protection
(privacy) or trade secret concerns.251 A recent example is the Ama-
zon/iRobot merger, in which concerns were raised that the data col-
lected by both parties, if combined, could increase privacy harms.252
Interestingly, in some cases anticompetitive concerns might be miti-
gated by data-protection regulation.253 We suggest that in such cases an
interdisciplinary approach be taken, involving consumer protection
(including data protection) by the FTC and potentially other adminis-
trative agencies.254
250
Algorithmic Competition - Note by Germany, DAF/COMP/WD(2023)61 at para. 40-57,
https://one.oecd.org/document/DAF/COMP/WD(2023)61/en/pdf
251
Chirita, supra note 43.
252
Elizabeth Warren et al., Letter to Lina Kahn, Sep. 28, 2022, https://www.warren.sen-
ate.gov/imo/media/doc/Letter%20to%20FTC%20on%20Amazon%20-
%20iRobot%20Merger.pdf, p. 4
253
Sanofi /Google/DMI JV, supra note 107, recitals 68-9. The Joint venture raised the concern
that it could lock in patients by limiting or preventing the portability of their data to alternative
platforms. However, the Commission concluded that the parties lacked the ability to lock-in
patients given that users would have the right to ask for data portability in accordance with
the GDPR. For a critique of this decision see Michal S. Gal & Oshrit Aviv, The Competitive
Effects of the GDPR, 16(3) J. OF COM. L. & ECON. 349 (2020).
254
For some of the wider societal harms of algorithmic conduct see, e.g., OECD, Collusion,
supra note 1, at 44-5.
Likewise, the competition authorities should also consider other

forms of algorithmic-based regulations that might affect their fea-
tures and outcomes.255 In particular, laws that mandate algorithmic
transparency, accountability, or fairness may create externalities on
marketplace dynamics that should be part of the analysis. To illustrate,
take the proposed Algorithmic Justice and Online Platform Transpar-
ency Act of 2021,256 which grants users of online platforms rights to
data portability, transparency, and non-discrimination.257 As noted
above, transparency might strengthen algorithmic coordination. At the
same time, mandatory disclosure by the platform of the personal infor-
mation it collects, and how it is used in its algorithmic processing,258
might limit the motivation of some users to provide personal infor-
mation to the platform, thereby affecting market power and the ability
of the platform to engage in price discrimination. The effects of such
rights on competition will also depend on how the rights are defined
and enforced. Similarly, the proposed European AI Act imposes special
obligations on operators of algorithms that impose a high risk to cus-
tomers, defined to include a risk of adverse impact on fundamental
rights, including privacy.259 If digital profiles used for price discrimi-
nation adversely impact privacy, the algorithm will be placed in the
high-risk category, and its operator would be forced to implement nu-
merous tools such as risk management systems, record keeping, and
transparency Such systems can, in turn, aid enforcers in detecting harm
inflicted on consumers.
V. CONCLUSION
Algorithms are fast becoming essential tools for decision-making

in the marketplace. As such, it is essential to ensure that mergers that
facilitate or rely on the use of algorithms meet merger policy goals. The
importance of this task is underscored by the fact that the consequences
of algorithmic use are not efficiently addressed by alternative consumer
protection or antitrust laws. We can thus not afford to disregard, or give
insufficient weight to, the effects of algorithms on merger review.
This article mapped some of the effects of algorithms on market
dynamics, and translated them into merger policy. In the process we
255
We leave for future work whether such laws are welfare-enhancing, and whether new,
potentially more interventionist, regulatory tools might be more effective than merger policy.
256
H.R. 3611, 117th Cong. (2021-2).
257
Id., sections 3-5.
258
Id., section 4.
259
European Commission, COM/2021/206, Final Proposal for a Regulation of the European
Parliament and of the Council Laying Down Harmonized Rules on Artificial Intelligence and
Amending Certain Union Legislative Acts (Apr. 21, 2021).
2023 49
took account of both substantive and institutional issues; assumptions

as well as to analytical tools; unilateral and coordinated conduct; and
market power as well as market conduct. Given the increased use of
algorithms, their effects on merger review should ideally be reflected
in both horizontal and vertical merger guidelines.260
260
Our findings and suggestions also have relevance for joint venture regulation.

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ALGORITHMS, AI, AND MERGERS

Michal S. Gal and Daniel L. Rubinfeld*

Forthcoming, Antitrust Law Journal

Algorithms, especially those based on artificial intelligence, play

ingrained in merger control, suggesting that a more informed approach

Algorithms, especially those based on artificial intelligence (AI),

detect and analyze anti-competitive conduct.3 This game-changing

II. A PRIMER ON ALGORITHMS

The digital revolution has brought with it increasingly intensive use

quicker decisions and reactions to changing conditions;20 by automat-

Algorithms of all kinds can be used by firms to perform a myriad

its algorithm to technologically restrict access of rivals to a unique da-

III. ALGORITHMS AND COORDINATED CONDUCT

Algorithms can facilitate anti-competitive conduct in various ways.

1. Effects of Algorithms on Coordination

Coordination between competitors is a primary concern of merger

used a third-party provider pricing software to aggregate their pricing

matched, making them unprofitable.71 Furthermore, their analytical so-

some uses of expert and autonomous algorithms are considered to be

Type of conduct Potential Effects of Potentially Cap-

Expert algorithms Lowering barriers to Yes

Lowering barriers to No, unless facilitat-

Table 1: The effects of AI on coordinated conduct and the availa-

2. Implications for Merger Review

Merger review has an important role to play in regulating all types

Accordingly, merger review can play a double, interconnected role.

lead to coordination.94 Algorithmic coordination challenges these as-

A. The merger will shorten the time needed to reach algorithmic

B. A firm is acquired for its dataset, on which the algorithm is

makes it easier to distinguish between these two causes, coordina-

C. A firm is acquired for its algorithm. There may be several rea-

D. Conglomerate mergers. Such mergers are generally assumed to

fly under the radar.109 In addition, due to transfer learning, algo-

Consider also the weight given to asymmetry in merger review.

Algorithmic coordination also affects merger remedies. Take, for

disclose.120 For example, ordinarily information becomes less compet-

analysis can be aided by predictive algorithms, used to determine both

IV. ALGORITHMS AND UNILATERAL CONDUCT

Algorithms also affect the ability of firms to engage in unilateral

1. Algorithms and Market Power

To engage in unilateral conduct that might harm consumers, firms

Merit-based superior dynamic capabilities may increase productive

2. Algorithms and Unilateral Conduct

In this section we explore the effects of algorithms on five types of

Firms with substantial market power can unilaterally charge ho-

Enter algorithms. Predictive algorithms can better analyze the ef-

Algorithms can also increase firms’ ability to engage in discrimi-

Price discrimination is defined as charging different customers dif-

the next sub-part. The second is exclusionary conduct, leading to fore-

Algorithms increase the potential for predatory pricing.154 Preda-

D. Supra-Competitive Selective Pricing

Selective pricing, in which a buyer offers a higher price to some

E. Exclusion by Limiting Interoperability

Algorithms can also limit the use by another firm of a dataset or a

of a firm’s value creation, artificially limiting complementary function-

3. Implications for Merger Review

To this point, we have established that algorithms can affect market

Type of conduct Effects of algo- Captured under

High prices More precise maxi- No

Table 2: The effects of AI on unilateral conduct and the availability

The increased risk of unilateral exploitative or exclusionary conduct

Facebook's wish to gain control of Instagram's much more efficient al-

stronger analytical capabilities to extract information from the dataset,