The Australian Competition and Consumer Commission wades into big data, algorithms and data-driven innovation

Big data.  Algorithms.  Data-driven innovation.  Data analytics.  Colluding robots. 

Australian Competition and Consumer Commission (ACCC) Chairman Rod Sims stepped through these thought-provoking and emerging developments of the world information revolution at a conference in Sydney headlined: ‘Can robots collude?’¹

Mr Sims addressed the rapid growth in the use of algorithms and big data, and the opportunities and threats they pose for both competitors in business and consumers in Australia.

Setting the scene, Mr Sims noted that we are living through an information revolution – in short, an economic revolution.

“[V]astly improved data capture, processing speed and developments in machine learning are reshaping the way our economy functions before our eyes…the Productivity Commission’s recent report into Data Availability and Use highlights estimates that 90% of the world’s information has been generated in just the past two years,” Mr Sims said.

This exponential growth in the creation of information has spawned the pursuit of data-driven innovation (DDI) to transform growth and prosperity.  DDI is an emerging process of forecasting how an event will unfold in real time based on the ability to access and process data at super-speed.

The potential economic upsides of DDI for businesses and consumers are tantalizing.  But equally, in the midst of any new revolution, there are the attendant risks for corruption and illegal conduct to take a foothold.  But the ACCC is, while welcoming the innovations the information revolution has been producing, watching, learning, adapting and working hard to keep abreast of potential competition issues.

The ACCC notes the economic positives DDI will deliver.

“An obvious benefit is the ability for customers to rapidly find what they need online.  This reduces search costs and can increase competition between goods and services providers,” Mr Sims said.

A now everyday example in this area are travel and navigation apps that provide us with real time solutions for getting about, how best to get there and what options are available to do it.  So too in the area of real time pricing information, Uber fares and petrol pricing being two examples cited by the ACCC Chairman.

On the flipside, the ACCC is conscious of the capacity for anti-competitive conduct to creep in where DDI boldly goes to seek out and explore new economic opportunities.  Mr Sims highlighted the potential for competition issues with online platforms.

“Last year, following an ACCC investigation into the vertical restraints imposed by online travel agents, Expedia and Booking.com agreed to remove contractual requirements restricting Australian accommodation providers from offering better room rates or different inventories to other online agents and through offline channels,” Mr Sims said.

Another ‘under watch’ area will be reviewing merger scenarios:

“where both parties are involved in collecting and selling big data or they are vertically linked in the big data supply chain.  Obviously, the competition issues raised will vary on a case-by-case basis and depending on the market involved.  Like any valuable asset, the collection and possession of big data may be a decisive factor in certain transactions.  For example, this may be the case where a merger is likely to have the effect of foreclosing access to unique data that is essential for competitors to compete or for new rivals to enter the market.”

Mr Sims also noted that a primary focus area will be whether DDI increases the risk of collusion, (the behaviour in relation to pricing that leads to poor economic outcomes), as opposed to parallel conduct outcomes which are lawful.  In doing so, Mr Sims referred to the currently competing held views on whether pricing and profit maximising algorithms are susceptible to collusive outcomes that may contravene competition laws.

While noting the pro and con discussion on the point, Mr Sims firmly warned:  “In Australia, we take the view that you cannot avoid liability by saying “my robot did it”.

Although noting the future risk of AI robots engaging so as to produce sustained collusion, the ACCC Chairman said:  “However, I am confident that our laws, particularly with the addition of the new concerted practices prohibition but also the new misuse of market power provisions, can deal with either situation if they substantially lessen competition.  At this stage, the ACCC has not seen any anti-competitive algorithms which require an enforcement response beyond what is now available to the ACCC under Australian law.”

The ACCC will, however, be watching!