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Panel discusses the relation between algorithms and the formation of cartels


Professor Michal Gal, from the University of Haifa (Israel), was CADE's guest to talk about the topic in the Brazilian Anticartel Week
published: Oct 14, 2020 09:13 PM last modified: Oct 14, 2020 09:13 PM
by International Unit

On 7 October 2020, the Administrative Council for Economic Defense (CADE) held another panel of the Brazilian Anticartel Week (SNCC). The debate concerned the topic of "Cartel by means of algorithms", hosted by the researcher and professor Michal Gal from the University of Haifa (Israel), and facilitated by Fernanda Garcia Machado, general coordinator of antitrust analysis of CADE.

Professor Michal Gal explained how algorithms change the ways economic agents coordinate to form cartels. At the beginning of her speech, the professor highlighted the benefits algorithms may bring, such as smart cities, more efficient production and personalized products and services. However, technology may also contribute to personalise and discriminate prices, thus facilitating the establishment of cartels between competitors.

Subsequently, based on the theorist George K. Stigler, the researcher deepened on the conditions in which algorithms operate to coordinate prices. Among them, it was stressed the easiness of agreements between competitors, since algorithms assist in speedier and more sophisticated calculations for price definitions. It was also emphasised that the prompt detection by the algorithm of a price rise or decrease of a competitor favours the standardisation of prices by the others.

Furthermore, professor Gal presented an overview of the future of antitrust conducts detection involving algorithms. She has outlined examples in three operating areas: broadening knowledge on the topic, creation of detection tools (using algorithms to identify the conducts), and hiring data scientists for teams fighting such conducts.

About the SNCC

From 5 to 9 October, CADE held the Brazilian Anticartel Week (SNCC). The event took place virtually and aimed to strengthen actions against anticompetitive conducts in addition to expand the collaborative network of governmental bodies partners in the segment. The series of debates had the participation of national and international agents who shared experiences and best investigation techniques to allow Brazil to continue promoting the proper functioning of markets.

Cartel is any agreement or concerted practice between competitors to fix prices, divide markets, restrict production or rig bids in government procurements. By implying price rise and supply restrictions, without any economic benefit, cartels result in severe harm to consumers, making goods and services unavailable for some and unnecessarily expensive for others. Due to the several harms it causes, cartel is considered the most serious economic crime.