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| 1 minute read

Buyer Beware - Antitrust Issues in Using AI-Powered B-to-B software

I remember my years renting apartments in Manhattan - with absolute dread! Every time I had to move, it seemed that the brokers and landlords had the upper hand, the system was rigged, and that you had to “know someone” to get a good deal. So, it is no surprise to see Senator Amy Klobuchar - who Chairs the Senate's Antitrust Subcommittee - take the issue of AI-powered software tools used in setting rental prices – allegedly facilitating coordination if not outright collusion among owners of rental buildings. A few things jump out on this issue.

First, politics matters. There are only so many hours Congress can spend on any particular antitrust issue. And although technology plays into this issue, it is the fact that it is apartment rentals at issue that is driving Klobuchar's opening statement. If this were about commercial real estate or some sort of widget, I wonder if it would have gotten political traction.

Second, like when I was renting, nobody likes to feel like they are at the mercy and whim of others about an important expenditure. The allegations that the algorithms here were operating in secret adds to the sense of unfairness. And the illusion that building owners were competing against one another – while allegedly not competing – adds to the upset.

Third, it is often the case that companies don't think about these issues when offered the chance to use technology to streamline their operations. And the companies offering technology – AI-powered or not – don't necessarily have the sense, and maybe don't have the same incentive to make sure that its users are not inadvertently sliding into an antitrust kerfuffle.

All of this is a good reason for companies to consider the perception – as well as the reality – that amazing and efficient software can come with serious risks. So, buyer beware!

Second, housing is an area in which we have seen the widespread use of algorithmic pricing tools designed to raise prices even at the expense of higher vacancy rates. A growing number of companies like RealPage and Yardi offer services that collect competitively sensitive pricing information from competing property management committees, feed that data through sophisticated algorithms, and recommend unit-by-unit prices so landlords can charge a certain rent. Landlords have figured out that it is better for them and their bottom lines to use these products to price units high so that some of them actually sit empty, but it is easier to have them priced high for them in the long term. And so, I believe landlords should be competing on price.


antitrust, tech