Robo cartels sound like something out of a futuristic AI movie.
In fact they are real, they threaten to drive up prices for consumers and they could land businesses in court facing fines of $10 million.
Also called algorithmic collusion or AI cartels, they are a new way in which anti-competitive conduct such as price fixing, information sharing, resale price maintenance and coordinated conduct can happen.
They are becoming an increasing risk as more businesses embed AI in their daily decision making.
WATCH: Bell Gully’s Glenn Shewan explains how AI can unintentionally create competition law risks for businesses
The warning comes in a new report in its Big Picture series, where law firm Bell Gully explores the competition law risks associated with the use of artificial intelligence tools.
The report, Algorithmic Collusion and AI cartels: risks under New Zealand’s Commerce Act, explains how cartel activity can arise through these tools.
It includes using a pricing algorithm as part of an explicit agreement with competitors to set prices, agreeing with competitors to use the same software to align prices, and sharing confidential competitor information.
AI is transforming the way businesses make decisions, Bell Gully’s Glenn Shewan says, but the AI tools they use could also lead to competition law breaches.
The report looks at the evolving regulatory landscape in New Zealand and overseas, and outlines practical steps businesses can take to mitigate the new risks.
Shewan said the Commerce Commission was keeping a close watch on AI developments and he warned that businesses wouldn’t be able to blame the algorithms for mistakes or breaches.
“New Zealand’s competition rules apply whether decisions are made by people or algorithms. Businesses remain responsible for the competitive outcomes produced by their AI tools,” he said.
According to the Bell Gully Big Picture report, the Commerce Commission’s AI paper suggests that liability could extend to designers or manufacturers of the tool.
That means that businesses may have to extend AI training to staff who usually work in the background, like the software engineers, Shewan said.
Already cases have emerged internationally relating to the use of AI algorithmic pricing tools.
Shewan cited a case in the US where landlords were caught out for using AI-enabled cartel conduct.
A White House report found that as many as one in four rentals across the country may have been influenced by algorithmic rental pricing software.
The pooled confidential data and software design were said to “reduce genuinely independent decision making across the industry,” the White House report found.
“International regulators are already taking action on AI-enabled cartel conduct and algorithmic pricing practices.
“Given those global enforcement trends, New Zealand businesses should expect increasing scrutiny in this area,” he says.
