Algorithms unravelled: observations on the audit of Uber and Amazon marketplace algorithms

Abstract

Claims have been made about the ability of an algorithm to collude without a thorough understanding of how such an algorithm operates. This chapter takes a unique approach and analyses two engineering studies, auditing the Uber algorithm and the Amazon Marketplace algorithms, to determine whether either of them can inflict competition law infringements in specific algorithmic collusion. This chapter first reveals that Uber’s algorithm is opaque and that Amazon Marketplace’s algorithms are transparent. The opacity means that neither the operation nor the data on which it operates is readily observable to competitors, which is in contrast to transparent algorithms. Thus, this chapter demonstrates that unless there is artificial interference with the algorithm, competition law infringements are unlikely in the case of opaque algorithms. Transparent algorithms do not always result in algorithmic collusion, as defined by the current competition law theory, but they may increase the likelihood of tacit collusion at higher price levels than when no algorithms are used.