Uncovering tacit algorithmic collusion in South Africa’s markets

Abstract

Algorithms are designed to teach machines to use data to predict outcomes, identify patterns and structures, or learn to perform complicated tasks. Businesses use algorithms to predict and measure the likelihood of future outcomes in a market. Such predictive analytics can be used to estimate consumer demand for a product and consumer behaviour and preferences, and to forecast internal and external risks that may cause shock to a market. Algorithms are also beneficial to consumers. They grant consumers access to information about the competitive dimensions of a market, and about product quality and prices. As a result, consumers can make informed decisions when engaging with the market. While the use of algorithms encourages efficiency in markets, it may also enable firms to engage in tacit collusion. In South Africa, collusion is prohibited by section 4 of the Competition Act No 89 of 1998 (the Competition Act). This chapter will analyse whether the Competition Act contains sufficient tools for the detection and regulation of tacit algorithmic collusion.