Should We Be Concerned That Data And Algorithms Will Soften Competition?

By Paul A. Johnson

Firms are using algorithms to analyze customer and competitor data in innovative ways. Will this practice soften competition by allowing firms to tacitly collude? Will it allow firms to market to customers in ways that soften competition? This article argues against answering these questions categorically because, depending on the facts of each case, these practices can either soften or sharpen competition. And while the use of algorithms to analyze data is not new, the increased use of more sophisticated algorithms that leverage better and more expansive data will likely amplify both procompetitive and anticompetitive effects. Nevertheless, antitrust authorities can expect to face challenges when taking selective enforcement action against the use of algorithms that facilitate tacit collusion or otherwise soften competition.