Question Period Note: ALGORITHMIC PRICING AND COLLUSION IN ARTIFICIAL INTELLIGENCE

How is the government addressing emerging issues related to algorithmic pricing and collusion?

• The Government of Canada has taken proactive action to ensure marketplace frameworks can handle developments in artificial intelligence.
• Recent reforms to the Competition Act make the law more flexible and will better support the Competition Bureau’s efforts to promote competition and enforce the law as it pertains to digital platforms offering services to Canadians.
• With Bill C-27, the government has introduced the Artificial Intelligence and Data Act to create a new regulatory system aimed at encouraging the responsible development and use of AI as well as digital services.

The increasing prominence of artificial intelligence (AI) has led to the development of tools used in various sectors across the economy. For competition authorities, this raises concerns about the impact of AI on market competition in areas such as competitive pricing, control and access to AI inputs, and the expansion of existing large firms into new markets.

When considering the direct impact on consumers, there are questions as to whether price coordination undertaken by algorithms or other technologies could negatively affect affordability.

In different jurisdictions, competition authorities are considering whether existing competition regulations are adequate to deal with new market realities.
• In the European Union, the July 2023 Guidelines on horizontal cooperation agreements explicitly acknowledged the use of algorithms by industry and identified scenarios where they could be of concern, more specifically, that collusion by code (when competitors agree on the use of a common pricing algorithm) and hub-and-spoke scenarios (when competitors subscribe to the same third party pricing tool that uses commercially sensitive information from competitors which result in an unlawful information exchange) would raise questions under existing competition law.
• In the United States, there is an ongoing case initiated by the Department of Justice in August 2024 against RealPage, a commercial revenue management software that landlords can use to price rental units. The complaint alleges that RealPage contracts with competing landlords who agree to share non public, competitively sensitive information about their rental rates and lease terms to train the algorithmic pricing software, and in exchange, landlord would receive pricing and lease terms recommendations from the software. The Department of Justice claims that this is a “modern way to violate a century-old law through systematic coordination of rental housing prices”, which ultimately undermines competition and fairness for consumers.
• In Canada, the Competition Bureau is currently conducting an investigation into Kalibrate, a company that, among other business activities, primarily provides data services in relation to retail gas and diesel, such as competitive intelligence, location consulting and pricing services. Unlike in the United States, there is no conclusion of wrongdoing at the time, as the Bureau is looking to determine how Kalibrate provides pricing guidance to gas station operators and whether its tools have an adverse effect on competition.

Competition authorities are undertaking these actions under current law. Canada’s Competition Bureau capacities in this regard were enhanced by Budget 2021 investment of $96 million over five years to ensure it is equipped with the necessary digital tools for today’s economy.

 
In parallel, the Government has introduced three rounds of legislative reforms to the Competition Act – through bills C-19 (Royal Assent in 2022), C-56 (2023) and C-59 (2024). It also introduced the Artificial Intelligence and Data Act as part of Bill C-27, which is currently being studied by the Standing Committee on Industry and Technology. A regulatory framework dedicated to AI would offer another potential avenue to monitor and take action should AI cause economic harm in the marketplace.

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