The integration of AI in markets raises significant competition law questions in the EU. Its potential use for anticompetitive agreements, both horizontal and vertical, under Article 101 of the Treaty on the Functioning of the EU is analyzed. Issues such as cartels, input foreclosure, and enforcement mechanisms are examined, highlighting the complex interplay between AI technology and competition compliance.
The rise of artificial intelligence (AI) offers immense capabilities alongside its potential for misuse under EU competition laws. The EU AI Act categorizes AI systems by their varying autonomy and their ability to generate outputs impacting different environments, prompting discussions about compliance with competition regulations.
This analysis delves into how AI could facilitate anticompetitive horizontal and vertical agreements as per Article 101 of the Treaty on the Functioning of the EU, as well as its potential role in assisting law enforcement in these domains.
Horizontal Agreements
AI technology could play a significant role in activities such as cartels and hub-and-spoke arrangements. While autonomous price coordination isn’t directly illegal under EU law, it could pose future complications. Agreements within the AI market mirror those in traditional markets, yet the urgency for AI talent may lead to no-poach agreements that suppress labor market competition.
Cartels
Explicit collusion, featuring direct communication between competitors to arrange practices like price-fixing, is the starkest infringement of EU competition laws. Once established, cartel members might deviate to maximize personal gain. Here, AI can stabilize cartels by automating agreements and monitoring individual compliance, complicating detection of anticompetitive behaviors. History has shown this, as evidenced by the UK Competition Markets Authority’s findings involving automated repricing software among online sellers.
Hub and Spoke
Anticompetitive information exchanges can arise indirectly when firms rely on a third-party AI-driven platform without rejecting its practices. For instance, travel agencies allegedly collaborating via a common booking platform demonstrated how terms could bring about collusion. The EU Court supported these notions, highlighting that knowledge of anticompetitive modifications implies complicity.
Autonomous Price Coordination
Competitors might independently utilize distinct AI pricing tools that can lead them toward non-competitive price levels in automated market interactions. Current experiments hint at possible tacit collusion, although legal frameworks don’t yet encompass such scenarios. This could alter as AI evolves and complicates our understanding of competition law’s boundaries.
Vertical Agreements
Typically, vertical agreements across different supply chain levels are legal under EU law. The Commission’s Guidelines clarify that many of these agreements are pro-competitive. Nonetheless, some could pose concerns, particularly regarding input foreclosure.
Input Foreclosure
Anticompetitive vertical agreements may restrict essential inputs for other firms, particularly when exclusive deals arise between companies at different levels of the AI supply chain. Such arrangements could inherently lessen competition by depriving other players of vital resources, like technology access, unless the involved parties fall below a certain market share threshold.
Hardcore Restrictions
Vertical agreements could also contravene laws despite not exceeding market share limits when they incorporate hardcore restrictions, like enforcing resale price maintenance measures through AI monitoring.
Resale Price Maintenance
Sellers cannot impose a fixed or minimum price on buyers. However, AI can enhance market transparency through price suggestions, remaining legal until buyers engage in fixed agreements based on these recommendations. A prominent case in 2018 saw significant fines imposed for addressing price deviations through AI, indicating the risk of illegal enforcement of resale price agreements.
Exclusive or Selective Distribution Systems
AI tools may also reinforce illegal entitlements within exclusive or selective distribution systems by monitoring compliance with territory restrictions and customer limitations.
Enforcement
Competition authorities envision leveraging AI to refine case management and boost investigatory efficacy, reducing investigation durations and uncertainty for firms involved. However, careful design and testing of AI applications are essential, ensuring adherence to legal standards, including GDPR and the AI Act.
AI presents both opportunities and threats in the realm of EU competition law. While it can enhance efficiencies in monitoring and enforcing agreements, it also poses risks of facilitating anticompetitive conduct through horizontal and vertical agreements. Ongoing regulations will likely need adaptation to address the rapidly changing landscape shaped by AI technologies, demanding vigilance from both enforcement bodies and market participants. As competition authorities explore AI’s role in investigations, careful consideration of compliance with existing legal frameworks will be essential to ensure fair practices in this evolving domain.
Original Source: www.wilmerhale.com
