Are We Heading Towards an AI-Driven Price-Fixing Era?
In a burgeoning world of technology where Artificial Intelligence increasingly molds our everyday lives, a new concern has surfaced that could redefine traditional economic practices. Recent developments suggest that the seemingly innocuous use of AI in determining rental prices might hide a darker reality—one that echoes the age-old problem of price-fixing.
Rogé Karma recently highlighted a significant issue in the rental market: many landlords now rely on a platform called RealPage to determine rent prices. On the surface, this service is marketed as a tool to help landlords optimize rental income. However, ongoing legal battles suggest it might be facilitating a covert form of price-fixing with the aid of AI technology.
Traditionally, price-fixing is envisioned as a secret pact among business rivals, conspiring to impose uniform, inflated prices, thus stifling competition. This practice is seen as a direct affront to free-market principles and carries hefty penalties under antitrust laws. Justice Antonin Scalia notably termed it the “supreme evil” of such laws, with possible sentences reaching up to a decade in prison and fines as high as $100 million.
The case with RealPage, however, presents a modern twist. Instead of corporate collusion behind closed doors, landlords can independently utilize RealPage’s “property management software.” By inputting their data—such as rental rates and vacancy statistics—an algorithm that already has insights into local competition suggests optimal pricing. If widely adopted, this could mimic the effects of traditional price-fixing: synchronized price hikes across the board, absent the need for any clandestine coordination.
The absence of price competition is detrimental not only to innovation and cost-reduction efforts from businesses but also leaves consumers facing persistently high prices with little choice. Alarmingly, the trend of algorithmic price-fixing seems to be expanding beyond real estate, threatening various sectors of the economy. As we enter this new realm, it remains crucial to evaluate whether existing legislation can effectively address these emergent challenges.
For further insights, read more at The Atlantic.
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