The ghost cartel — your pricing algorithm may have stopped competing without your knowledge
Antitrust law was built to catch human agreements. It has no name for what machines learn to do on their own.
The Federal Trade Commission warned Amazon of a pricing tool named Project Nessie, which identified products likely to follow an Amazon price increase, raised the price, and held it once competitors matched. The agency claims the tool generated over $1 billion in excess profit and was paused during periods of heightened scrutiny, then resumed.
However, Amazon denies this, stating the tool was discontinued years ago. The first scenario, a deliberate collusion, involves a company designing a system to anticipate rivals' actions. The second scenario, an unintentional collusion, occurs when multiple companies independently deploy automated pricing software, leading to higher margins without any meeting, message, or agreement between them.
The third scenario involves competitors feeding their data into a common provider whose algorithm guides them all. This ghost cartel, where pricing algorithms produce the economic outcome of a cartel without collusion, is challenging for antitrust law to detect and enforce.
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