AI-enabled price discrimination as an abuse of dominance: a law and economics analysis

Abstract

In digital markets, concentrated Big Data and analytical algorithms enable undertakings to predict each consumer’s willingness to pay with increasing accuracy and offer consumers personalized recommendations and tailored prices accordingly. In this context, concerns have arisen about whether and when AI-enabled price discrimination amounts to an abuse of dominance under competition law and would require a legal response. To address these concerns, this paper will analyze AI-enabled price discrimination from a comparative law and economics perspective. In economics, price discrimination is not always undesirable as it can increase static efficiency, and, on some occasions, it can promote dynamic efficiency and boost consumer welfare. Nevertheless, it may also lead to exclusionary and exploitative effects, especially once Tech Giants abuse their dominant positions in relevant markets. Since the protection of free competition and consumer welfare are objectives of competition law in China and the EU, competition law seems a proper instrument to step into digital markets to address these concerns. Indeed, the EU and China have established mixed regimes of competition law and other rules to tackle unfair and/or anti-competitive AI-enabled price discrimination. As such, AI-enabled price discrimination does not always require a competition law response and it requires competition authorities to make a trade-off between different considerations.