Mergers, Acquisitions and Algorithms in an Algorithmic Pricing World

This paper considers whether the increased use of pricing algorithms presents issues that existing merger control frameworks and practices are inadequate to address, particularly in relation to pre-merger disclosure of pricing algorithms and the suitability of current tests, frameworks and remedies for addressing coordinated effects. These questions are addressed through a comparative and critical analysis of the merger control regimes and practices of the European Union, United Kingdom, and Australia. It finds that whilst such regimes and practices are broadly adequate for dealing with algorithmic transactions, there are nonetheless potential areas for improvement. Disclosure of a pricing algorithm may contravene prohibitions on the sharing of competitively sensitive information. As such, merger parties may need to rethink aspects of their usual due diligence procedures. Pricing algorithms may also increase the potential for coordinated effects to arise in some markets that would ordinarily have been considered too complex, asymmetrical, opaque, or insufficiently concentrated for tacit collusion to occur, or be used to retaliate more effectively against deviations from a coordinated equilibrium, or to raise the height of barriers to entry. Competition authorities may therefore need to amend their standard approach to investigating and assessing coordinated effects, as well as their traditional approach to remedies