Preventing Algorithmic Collusion Act

Summary#

This bill would ban the use or distribution of pricing algorithms that use, include, or were trained with nonpublic competitor data. It requires a person who uses or distributes a pricing algorithm to provide a written report to the Attorney General or the Federal Trade Commission (FTC) within 30 days of a written request. Reports must identify who developed or distributes the algorithm, say whether it sets prices automatically, explain the algorithm’s rules, list all data and sources used (including training data), describe any price or wage discrimination, and note recent changes. A senior officer must certify the report under penalty of perjury. Reports are treated as confidential trade secrets but may be shared between the DOJ and FTC or shared with NIST for technical help.

The bill creates a legal presumption that distributing or using such an algorithm to set prices can be an agreement to fix prices under the Sherman Act and an unfair method of competition under the FTC Act when the algorithm is distributed to or used by multiple market participants. Persons who distributed the algorithm and knew or should have known it used nonpublic competitor data can be held jointly and severally liable. A defendant who did not develop or distribute the algorithm can rebut the presumption by clear and convincing evidence that they did not and could not reasonably have known the algorithm used nonpublic competitor data.

Businesses with $5,000,000 or more in annual revenue must disclose to customers (before purchase) and to current or prospective employees or independent contractors when a price or commercial term is set or recommended by a pricing algorithm. Disclosures must note if the algorithm sets different prices for similar customers or workers and must identify third-party developers when applicable. The FTC or Attorney General may bring civil actions to enforce the prohibitions and disclosures, seeking civil penalties, injunctions, or other relief. Section 4 (ban on nonpublic competitor data) and section 5 (presumption) take effect 90 days after enactment. The FTC must publish a study within 2 years about the use, harms, benefits, and possible oversight of pricing algorithms.

What it means for you#

• If you run a business that uses pricing algorithms, you cannot use algorithms that use nonpublic competitor data. You must provide detailed reports if the DOJ or FTC asks and must certify those reports. If your business has $5,000,000 or more in revenue, you must tell customers and workers when prices or terms are set by an algorithm.
• If you develop or distribute pricing algorithms, you may face civil liability (including joint liability) if the algorithm uses nonpublic competitor data and is used by multiple market participants.
• If you are a customer, employee, or contractor, you should receive notice when a pricing algorithm affects prices, wages, or terms. The FTC will study how pricing algorithms are used and report findings in 2 years.

Expenses#

• The bill sets civil penalties for violations in court actions: at least $10,000 per day (adjusted for inflation) for each day a violation of the ban continues, or alternatively the sum of the price of each product or service sold using the violating algorithm, plus other appropriate relief such as injunctions.
• For failures to provide required disclosures, the bill sets civil penalties of at least $5,000 per day (adjusted for inflation) for each day the violation continues, plus other relief.
• No publicly available information on estimated costs to the federal government or detailed budgetary impacts is provided in the bill text or metadata.

Proponents' View#

• The bill’s title and text state that it is intended to prevent anticompetitive conduct through pricing algorithms, create a competition law enforcement audit tool, increase transparency about algorithmic pricing, and enforce violations using the Sherman Act and the FTC Act.

Opponents' View#

• No publicly available information.