DOJ Antitrust Division Enters the Digital Age
08/12/2015Pricing algorithms have become increasingly common devices to set pricing for internet sales, and those complex programming tools have caught the attention of DOJ’s Antitrust Division. A California man recently settled a criminal case pursued by the Division charging him with using pricing algorithms to coordinate online sales of wall décor on a popular internet auction site. This marks the first foray by the Division into e-commerce and portends further scrutiny of anticompetitive conduct in online sales.
David Tomkins set up an online store on Amazon Marketplace to sell wall posters and obtained commercially-available software designed to monitor competitors’ pricing for the same products. According to DOJ, Tompkins then programmed the software to coordinate changes in prices with those competitors, tending to fix and increase the prices of those posters on the site. The Division charged him with a violation of 15 U.S.C. § 1, the Sherman Antitrust Act.
As online commerce continues to expand its market share, it is inevitable that the Division will encounter a multitude of collusive, anticompetitive practices executed through obscure computer code that will challenge the Division’s scaled-down domestic prosecutorial resources. Proof of criminal intent and the existence of a conspiratorial agreement may be stymied by sellers’ reliance on sophisticated algorithms that most don’t understand. Nevertheless, the precedent set by the Tomkins case should put online marketers on notice that the Division has finally caught up to the modern world of e-commerce and that cyber price-fixing is no longer immune from the Division’s reach.