This paper, published in the Harvard Journal of Law and Technology and available at https://jolt.law.harvard.edu/assets/articlePDFs/v30/30HarvJLTech309.pdf, focuses on the use of algorithms by consumers to orient and even take decisions regarding their purchases.
The basic argument is that, with the Internet of Things, systems will move from merely making recommendations to making and executing decisions for the consumer by directly communicating with other systems through the internet. As rightly pointed out in the article, this is not unheard of: in some industries, such as stock trading, algorithms already automatically translate their results into buying decisions; there is even a washing machine that makes autonomous orders and payments (e.g., buying detergent) and updates the owner via a smartphone.
The paper usefully contains a literature review on algorithmic competition (which, it must be said, is still rather limited). It also makes some valuable points, such as:
- algorithmic consumers may submit suppliers to increased competitive pressures and change the parameters of competition (since they will be able to check more competitive parameters and options faster, and may facilitate buyer coordination);
- the market power of an algorithm (and its effectiveness) and competition among algorithms might be at least partially affected by access to data (the argument runs parallel to that for search engines and big data)
- due in part to this concern with data, algorithmic consumers could be used by existing dominant players to expand their operations (and, arguably, that is already the case with some “ shopping assistants” such as Amazon’s Alexa);
- competition law may have a role to play in alleviating some of the problems that the generalisation of algorithmic consumers can give rise to – and the paper contains a lengthy overview of those – but such a role is likely to be small when compared to other types of regulation.
This is one of the first papers on algorithmic competition, and an interesting one at that. Personally, I’m still waiting to see whether there is fire under the cover of all this smoke – but this paper is a good place to start understanding what all the talk about increasing heat is about.