According to the Department’s charges, each landlord who joined the scheme submitted confidential data on its own rental prices and availabilities, both current and anticipated, in minute detail, which it knew RealPage would combine with the same confidential data from the other landlords to calculate recommended rental prices for all the landlords, which they would all follow.

Cortland has agreed to settle with the Department, to end its involvement with RealPage, to refrain from engaging in any coordination on rental prices, to submit to monitoring by the Department, and to assist the Department in the continuing investigation and enforcement action. Cortland is one of the largest apartment managers in the United States, managing, as of 2024, more than 80,000 units and more than 220 properties in the United States.

Under the Antitrust Procedures and Penalties Act, the Department is required to publish any proposed antitrust consent decree, to give the public 60 days to comment, and to reply to the comments. The court then ultimately determines if the proposed decree is in the public interest, and if so, enters the decree as a final judgment as to the settling defendant.

CDT’s comments explain why in our view the proposed consent decree is in the public interest.

Read the full comments.

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After requesting and receiving, with the Department’s consent, two extensions, RealPage filed its response on December 3 – a motion to dismiss for failure to state a claim.^[1] Essentially, RealPage takes issue with the way the Department has defined the relevant markets for antitrust analysis, and further denies orchestrating or being involved in any pricing coordination among landlords.

Some might say that the Justice Department has come to the party late. The District of Columbia and Arizona had already brought enforcement actions under their own laws, and a federal class action was already pending in a federal district court in Tennessee.^[2] But the Department’s allegations provide far greater detail, benefitting from its greater resources combined with its stronger investigatory authority, which enables it to compel production of evidence during its investigation, before it brings an action, under the Antitrust Civil Process Act. 

As charged in the complaint, RealPage has created and advertised to apartment landlords an algorithm-powered system to collect and analyze, on a daily basis, current rental prices and planned future prices, and current availabilities and projected future availabilities for all participating landlords. This information is separately categorized for each individual rental unit, according to size, floor plan, layout, and amenities. RealPage makes explicitly clear to the landlords that it will analyze this information and provide pricing recommendations to each landlord based on this information. This kind of information is competitively sensitive, and in a healthy competitive marketplace it is closely guarded, not shared.

RealPage’s system has the hallmarks of a classic anticompetitive “hub-and-spoke”^[3] arrangement under which competitors coordinate pricing and output decisions through a central clearinghouse “hub.” This kind of arrangement has been found to violate section 1 of the Sherman Act, which prohibits contracts, combinations, or conspiracies in restraint of trade, provided that the evidence sufficiently demonstrates that the competitors along the “rim” had a “conscious commitment to a common scheme designed to achieve an unlawful objective.”^[4] It is not necessary that the competitors along the “rim” have direct communication with each other regarding the anticompetitive scheme, because they are communicating effectively through the “hub” as “spokes.”

Here, per the Department’s allegations, RealPage created the “hub” and advertised it to landlords, encouraging them to join up. RealPage explained that it would calculate pricing recommendations for them, based on pricing data submitted on a daily basis by every participating landlord in the market area. And that the recommendations would be guided by the highest prices being charged, which would enable each landlord to confidently increase its own rental prices in line with the high end of prices being charged by its competitors. 

So, per those allegations, the landlords were well aware that they would be “spokes,” participating along with their competitors, and that the result would be pricing recommendations that would result in increased prices. Or, as RealPage regularly puts it, would “raise all ships.” A RealPage revenue management vice president elaborated that this phrase means that “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the industry down.” And even more pointedly, that landlords using RealPage’s software would “likely move in unison versus against each other.”

Thus, the landlords who joined up were consciously committing themselves to a common scheme not to compete. Their commitment includes paying RealPage a hefty fee in recognition of the value they receive. 

But RealPage has allegedly gone beyond just creating and advertising the hub that enabled and facilitated a conscious commitment to unlawful pricing coordination. It has taken a number of calculated steps to make sure landlords follow through on that commitment. It constantly nudges landlords to follow each other’s price increases. It actively monitors prices charged on literally millions of apartment units – not only to calculate new pricing recommendations, but also to determine which landlords are complying with its recommendations and which are not. 

Each day, RealPage sends updated pricing recommendations to each landlord. RealPage makes it easy for the landlord to accept the recommendations in bulk – it can be done with a single keystroke, or even programmed for auto-accept, which RealPage strongly encourages landlords to adopt. Diverging from the recommendation, in contrast, requires the landlord’s property manager to affirmatively give RealPage a “strong sound business-minded” justification for each divergence, based on something the algorithm is not accounting for, such as local construction or renovations occurring in the building. And whenever RealPage disagrees with the justification, which is usually, the matter is escalated to the property manager’s supervisor, and upward, with increasing aggressiveness.

Internal training explained that RealPage wanted to “widen auto accept parameters” by introducing the feature and then “creating enough trust so that over time we have client[s] that are willing to let auto accept run with very wide parameters… AKA – accept all recommendations.” RealPage trains pricing advisors to have an “accountability conversation” or a “refresher on short term vs long term goals” for clients that show less tolerance for increasing auto-accept parameters.

The result, according to the complaint: more than 85% of final floor plan prices are within 5% of RealPage’s recommendation.

The Department further charges that RealPage reinforces its algorithm-driven coordinated upward pricing recommendations by discouraging landlords from offering renters discount “concessions” – such as a free month’s rent or waived fees – as landlords in a competitive marketplace would have incentives to offer. In its “best practices” for landlords, RealPage’s guidance is simple: “Eliminate concessions.” A landlord’s agreement to refuse to offer concessions is bolstered by its awareness that competing landlords are receiving the same advice from RealPage.

Essentially, landlords are encouraged, and then pressured, to turn over rental pricing decisions to RealPage’s algorithm, knowing that it is coordinating pricing among participating landlords, pushing prices higher.

The Department alleges that RealPage’s pricing algorithm ratchets in only the upward direction. It resists recommending the kind of price decreases in response to a decrease in demand that would occur in a marketplace with healthy competition. Instead, the algorithm overrides its normal functioning to coordinate recommended reductions in supply – taking units off the market temporarily – the classic tactic used by price-fixers to reinforce inflated prices. RealPage refers to this as “revenue protection mode” or “sold out mode.”

Interestingly, the Department has brought the case under both section 1 and section 2 of the Sherman Act. Section 1 prohibits contracts, combinations, and conspiracies in restraint of trade – often referred to as collusion. It involves a de facto agreement – a “meeting of the minds” – between two or more entities. The prime example of a section 1 violation is price-fixing, essentially what is alleged here. Section 2 prohibits monopolization or attempts to monopolize. It involves having monopoly or market power, and using it to sabotage the competitive efforts of rivals through exclusionary conduct. A section 2 violation can be committed by one entity acting alone.

In this case, the section 1 collusion claims focus on anticompetitive benefits to landlords, and secondarily on the fees RealPage charges the landlords for participation in the scheme. The section 2 monopolization claims focus on the anticompetitive benefits to RealPage from the massive data it collects from bringing so many landlords into its scheme. The thrust of the claim is that rival apartment rental management software providers cannot compete with RealPage without entering into similar anticompetitive schemes, and even then, RealPage has the overwhelming and entrenched advantage in having signed up so many landlords under its own anticompetitive scheme and amassing all their data.

The section 1 claim describes long-recognized hub-and-spoke collusion. The section 2 claim is not long-recognized. The factual allegations describe a market share RealPage has achieved, and the barriers to entry resulting from the vast data RealPage has amassed that potential entrants could not get similar access to. There are not, however, allegations of actions that RealPage has taken to maintain a monopoly by sabotaging the competitive efforts of potential rivals – at least not in a way familiar in past antitrust cases. Instead, the alleged monopolization is more of a by-product of the collusive scheme. Indeed, RealPage has moved to dismiss the section 2 claim on the basis that it has not engaged in any exclusionary conduct – that amassing the data is not exclusionary.

The kernel of the Department’s section 2 monopolization claim is that, by creating and managing the hub-and-spoke collusive scheme, RealPage has intentionally made it impossible for a rival to offer the same benefits to landlords without engaging in a similar collusive scheme – in other words, impossible for them to compete on the merits lawfully – and which would likely be futile even if they did attempt it. According to the Department’s information, RealPage controls at least 80 percent of the market for apartment rental management software. No other revenue management company could hope to match RealPage’s access to landlords’ nonpublic, competitively sensitive rental data.

One potential advantage to the Department of bringing a section 2 claim is that the potentially available remedies go beyond ordering the cessation of the unlawful conduct, and include structural relief – that is, in this case, requiring RealPage to divest some of the parts of its operation that collectively enable the unlawful coordination among landlords. Structural relief is not generally available to remedy a violation of section 1. The Department may believe that the anticompetitive conduct alleged here cannot effectively be remedied without breaking apart the arrangement. 

It is also noteworthy that the Department has brought a civil enforcement action, not a criminal prosecution. Ordinarily, when the alleged conduct is clearly price-fixing among competitors, a criminal case is warranted. The courts have long considered price-fixing to be a per se violation, and do not accept any mitigating justifications.^[5] Three considerations likely influenced the Department’s decision. 

First, although the caselaw is ostensibly clear that price-fixing is per se unlawful, the courts have in practice recognized exceptions, when there are novel factual circumstances that courts have not previously considered. The Department may have decided that the factual allegations in this case were potentially too complex to rely on criminal prosecution and the requirement to prove the violation beyond a reasonable doubt. Indeed, the district court in the federal class action in Tennessee ruled that that case could not be brought as a per se violation. 

Second, although section 2 of the Sherman Act explicitly provides for criminal penalties equal to those in section 1, section 2 violations had not, until very recently, been criminally prosecuted for decades. And of the 168 criminal section 2 cases – brought between 1903 and 1977 – all but 20 were multiple-conspirator cases that could have been brought under section 1, and many were. Of the 20 single-defendant cases, only 12 resulted in guilty findings, most as a result of a nolo contendere plea and a fine. Only three cases resulted in prison; two of those involved crimes of violence, and in the other, the individual served only a single month in prison.^[6]

The Biden Antitrust Division revived section 2 criminal prosecutions for the first time in almost 50 years. It has brought three, none of which has reached a verdict or resulted in prison. All were against individuals – not companies – whose conduct clearly met long-established standards for guilt. Two of them involved multiple conspirators and were also brought under section 1.^[7]

Third, if the case were pursued criminally, the Department would have had to go it alone; the states would not have been able to join. Notably, the enforcement actions the Department is pursuing against Google and Apple for monopolization under section 2, each joined by several states, have been civil, not criminal. 

As the case moves forward, RealPage will have ample opportunity to justify its marketing and use of the pricing algorithm.

More broadly, the issue will not be whether the services RealPage provides include some that are lawful and even procompetitive. It will be whether the algorithm-directed pricing system specifically is permissible under the antitrust laws.

And the mere fact that an algorithm is driving the coordinated pricing will not excuse it. As then-Acting FTC Chair Maureen Olhausen remarked, antitrust enforcers evaluating the use of an algorithm in commerce will follow the “guy named Bob” rule – “Everywhere the word ‘algorithm’ appears, please just insert the words ‘a guy named Bob’ … If it isn’t okay for a guynamed Bob to do it, then it probably isn’t ok for an algorithm to do it either.”^[8]

^[1] Available at https://ecf.ncmd.uscourts.gov/doc1/13314442744.

^[2] RealPage, Inc., Rental Software Antitrust Litig. (No. II), 2023 U.S. Dist. LEXIS 230200 (M.D. Tenn. Dec. 28, 2023).

^[3] E.g., United States v. Apple, Inc., 791 F.3d 290, 314 (2d Cir. 2015).

^[4] E.g., id. at 315. See Interstate Circuit v. United States, 306 U.S. 208, 227 (1939) (“Acceptance by competitors, without previous agreement, of an invitation to participate in a plan, the necessary consequence of which, if carried out, is restraint of interstate commerce, is sufficient to establish an unlawful conspiracy under the Sherman Act.”)

^[5] United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218 (1940).

^[6] See Daniel A. Crane, Criminal Enforcement of Section 2 of the Sherman Act: An Empirical Assessment, 84 Antitrust L.J. 753 (2022).

^[7] Two of those cases were resolved with a guilty plea. Zito pled guilty in September 2022 to attempted monopolization, with an invitation to divide markets that would have given him a monopoly in highway crack-sealing services in Wyoming and Montana. He was sentenced to six months’ home confinement followed by three years’ probation. Tomlinson pled guilty in April 2024 to conspiring to rig bids for forest fire-fighting fuel truck services in Idaho and Nevada and to de-prioritize bids of others. He is apparently still awaiting sentencing. The case charged violations of both section 1 and section 2. https://www.justice.gov/atr/case/us-v-ike-tomlinson-and-kris-bird. The third case is still pending. Martinez and his co-conspirators are charged with violations of both section 1 and section 2 – price-fixing of transmigrante forwarding agency services for shipping vehicles from the United States through Mexico to Central America, and conspiring to monopolize by threatening potential competitors with violence. https://www.justice.gov/atr/case/us-v-carlos-favian-martinez-et-al.

^[8] Should We Fear the Things That Go Beep in the Night? Some Initial Thoughts on the Intersection of Antitrust Law and Algorithmic Pricing,” Maureen K. Ohlhausen, Acting Chairman, U.S. Federal Trade Commission, May 23, 2017, p. 10, https://www.ftc.gov/system/files/documents/public_statements/1220893/ohlhausen_-_concurrences_5-23-17.pdf.

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According to the district court’s recitation of the facts, Fubo and other independent streaming services have been seeking, for years, a license to offer consumers a narrower “skinny bundle” of live sports programming. The Defendants have refused, and have offered live sports programming licenses only in bigger packages that include programming that many consumers have no interest in. The additional undesired programming comes at additional cost to the independent streaming services, which has impaired their ability to offer competitively attractive live sports streaming packages to consumers, and has undermined the promise of the internet to provide consumers with a greater variety of innovative choices. 

Read the full brief.

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A corollary exposure to consumers courtesy of untrammeled data collection and powerful algorithms is enabling a seller to tailor the price it offers to what the seller knows about the particular consumer’s identity, preferences, and situation. This practice has been variously referred to as “individualized pricing” – or “dynamic pricing,” of which the practice is a subspecies – by those who wish to emphasize its potential benefits, or as “surveillance pricing” by those who want to highlight its invasiveness and its potential to be weaponized against vulnerable consumers without their awareness, let alone their consent.[2]

A more apt name might be “bespoke pricing,” as the price is being custom-tailored by the seller to fit the particular customer – made-to-measure.

Bespoke pricing is not entirely new. Some products and services innately require the seller to charge different prices to fit the particular consumer’s situation. Insurance and credit are two prominent examples, where underwriting is used to determine the price to charge the particular buyer based on the risk posed – because the actual cost to the seller – for the claims made on the policy, or for the default on the credit – cannot be determined until after the sale.[3] And it is also customary for larger consumer purchases like homes and cars, where prices are typically the result of negotiations between buyers and sellers.

Dynamic pricing in the broader sense includes charging different prices based on a seller’s sensitivity to fluctuations in supply and demand, which can have the effect of discerning different categories of buyers expected to be willing to pay different prices. One example is airline tickets that for the same flight are priced lower when purchased in advance – more likely by individuals and families planning travel for personal reasons, on a budget – and priced higher when purchased closer to the time of the flight – more likely by persons traveling for business, on a corporate expense account, or persons with an urgent, last-minute need to travel, and no flexibility.

Bespoke Pricing’s Ancient Origins

Bespoke pricing has ancient antecedents, hearkening back to the beginning of commerce and trade.[4] Even in prehistoric times, we can imagine that every exchange that did not occur by force was between two individuals who knew each other, or came to know each other, based on a recognition of each other’s needs and wants. Importantly, it was presumably a mutual recognition. 

Similarly, in a medieval marketplace, merchants exercised their own form of bespoke pricing, sizing up each prospective customer for how much they’d be willing to pay, and testing them with a higher, even exorbitant price initially. But customers could similarly size up the merchant, and could exercise their own recourse, not just to refuse to pay until the price seemed reasonable, but to walk through the marketplace to see what price other merchants were asking and what price they would accept. There was still mutuality, with a rough equivalence of transparency, and of bargaining power – especially when there were competing merchants.

Arrival of the Anonymous Buyer

Bespoke pricing continued into the Industrial Age, as selling increasingly moved into brick-and-mortar stores. Then in the 1870’s, a marketing revolution occurred – the price tag was introduced at a department store, the Grand Depot in Philadelphia, and quickly caught on.[5] Sellers realized they were not as apt to know their customers, and it became more efficient to post – to advertise – a price that all customers could see. This did not always prevent a customer from trying to bargain for a discount. But most customers came to accept the posted price, for most products. And store owners competed by setting the advertised price at a level calculated to appeal to as many consumers as possible, at a high enough price, to maximize profits. The price tag ushered in anonymity for buyers, and sellers coped by standardizing their prices.

Online Shopping Shifts the Balance

The internet promised to be a boon to consumers, making it far easier and more convenient for them to comparison shop across a vast, potentially unlimited number of sellers. And it largely delivered on that promise, and brought new, competitive pressure on sellers to make sure they were offering comparatively attractive deals. But online commerce also engendered a new market, for consumer data, which has been collected, organized, distributed, sold, and cross-referenced on a massive scale – sometimes referred to as “big data.”

Big data has created the potential for sellers to regain the upper hand, fundamentally reversing the anonymity equation. Now the seller’s pricing decisions can be obscured, while the buyer becomes an open book.

Pro-competition? Pro-consumer? Or Neither?

Proponents of bespoke pricing have touted it as a vehicle for promoting competition. And in theory, by enabling a seller to tailor its offer to a particular consumer’s situation, bespoke pricing could incentivize the seller to lower its price for that consumer to a point that wins the sale from some rival seller. Multiple rival sellers engaging in this practice simultaneously could, theoretically, create new possibilities for competition, bringing the efficient allocation of resources to new heights.

In practice, however, it is questionable whether more competition, and lower prices for some consumers, would actually be the result. It would depend on where the rival sellers’ profit-maximizing incentives lead them. Marshaling this increased amount of data into their pricing calculations might well lead them to monitor and coordinate with each other’s pricing, promoting collusion rather than competition.[6]

Moreover, the consumer would be left entirely in the dark about a seller’s price-setting context, while the consumer would be utterly visible to the seller. The seller would have access to vast amounts of data about the consumer, such as the consumer’s previous purchases of or searches for the product or service, and for similar and related products; the consumer’s income, assets, debts, and financial condition and history; other purchases that reveal the consumer’s propensity to spend; activities the consumer and the consumer’s family engage in that manifest a need for or benefit from the product or service; any urgency for that need or benefit; and broadly, any characteristics revealed by the consumer’s web-browsing history, or by other behaviors tracked and fed into the big data maw, that may indicate the consumer is more susceptible to sales-pitch puffery or pressure. 

Granted, those insights might enable a seller to spot a consumer who has thus far not been willing, and is not likely, to purchase at the original offered price, but who has a sufficient need or desire or use for the product or service to be more likely to purchase it at a somewhat reduced price. The seller could even sequentially reduce the offered price until that consumer is willing to buy its product or service rather than a competitor’s product or service. Isn’t that the essence of healthy competition?

If the engagement actually occurred in that fashion, that would indeed constitute competition, and that particular consumer would come out ahead in that instance, as would the seller.

The question is how likely bespoke pricing is to occur in that fashion. The same digital resources that would enable a seller to target price reductions can just as easily enable targeted price increases for consumers who the seller determines are willing to pay more.[7] Those digital resources can also enable the seller to coordinate with other sellers to avoid price reductions when they perceive anticompetitive price-fixing to be in their collective net interest.[8] Sellers engaged in such a price-fixing conspiracy have the incentive and, with those digital resources, the potential ability to retaliate against a seller who selectively cuts prices, because that undermines the stability of the conspiracy. But they do not have an incentive to retaliate against a seller who takes advantage of an opportunity to selectively raise prices.[9]

So all told, the incentives for using bespoke pricing are all too likely to skew in the direction of higher prices. Informed consumer choice is the engine that drives competition; because consumers won’t be as informed, and thus will have little or no agency in the supposed competitive benefits, they are more apt to be taken advantage of than to benefit.

Regardless, this justification is likely to be too abstract to appeal to the typical consumer. When consumers learn that companies are using bespoke pricing, they will assume that they are being subjected to it, without their knowledge or consent, and being taken advantage of. They are apt to react viscerally, to regard it as invasive of their privacy, and offensive to their sense of fairness. When they are told that it’s the “invisible hand”[10] at work, they are likely to conclude that the invisible hand is picking their pocket.

Consumers will see data-charged bespoke pricing as a fundamental reversal of the way the marketplace has worked, to their benefit, for 150 years, since the arrival of the price tag.

Possible enforcement action or legislation

Bespoke pricing has caught the attention of the Federal Trade Commission. The FTC has launched a study of the practice and its effects under its section 6(b) authority, requesting information from eight data intermediary companies that offer pricing products and services that incorporate data about consumers’ characteristics and behavior.[11] The results of the study will inform the FTC, Congress, and other policymakers, and the public, about the practice and its effects. And it will help the FTC determine whether the practice is a violation of the FTC Act and, if so, in what circumstances, or if new rulemaking or legislation is warranted to prohibit or rein it in.

The practice has also been the subject of hearings in the Senate Committee on Banking, Housing, and Urban Affairs, with follow-up letters to Walmart and Amazon inquiring about their use of pricing algorithms.[12] 

Stronger privacy laws 

Enacting stronger data privacy laws, which has been a top priority for CDT since our founding three decades ago,[13] would have many benefits for consumers, among them dramatically curtailing the potential for bespoke pricing.[14] Restricting sellers’ access to consumers’ personal data as a basis for setting prices would limit sellers’ intimate knowledge of their customers, and would confine targeting only to broad categories of consumers, based on factors like geography, timing of purchase, and quantity. With sufficiently strong data privacy protections, we could restore some anonymity to buyer identities, like price tags in a brick-and-mortar store offered.

Restoring anonymity through purchasing agents

An interesting approach to consider, in addition to or as an alternative to legal action or new lawmaking, is using technology to restore anonymity and put power back in the consumer’s hands, by means of one or more intermediaries who could act as a purchasing agent for the consumer. The seller would have no information about the prospective buyer beyond the fact that the buyer is choosing to use the intermediary.

To be most effective, an organization acting as purchasing agent would be able to guarantee – and willing to be held accountable for – preserving the consumer’s anonymity. This should include, for example, that the purchasing agent not ask for, collect, or retain any data beyond what is necessary and proportionate for acting as the consumer’s agent, including for ensuring that the product is delivered at the agreed price and terms.[15] The data should also be carefully protected against access by any third party, as well as by anyone working at the organization not involved in arranging the specific purchase.

Ideally, this would mean eliminating the use of any third parties to process the data. And for further protection, the consumer’s request, and all subsequent communications, would be encrypted.

One good option for a purchasing agent could be an independent, non-profit consumer organization with the capability and integrity to maximize reliability and trustworthiness. Using a non-profit could keep the fee the agent would charge to a nominal amount, close to the amount needed to cover the amortized costs of setting up the service and the expenses of running it.

Consumer Reports is one example of the kind of organization that could be a suitable candidate for establishing such an intermediary purchasing agent. CR has the credibility of a strong brand with consumers, as well as significant resources. And it has experience with two principal components of this approach, anonymous purchasing and agency. Its experience with anonymous purchasing goes back over many decades of purchasing the products it tests in the marketplace, without disclosing that CR is the one purchasing them. More recently, CR has established the Permission Slip,[16] under which a consumer can appoint CR as their authorized agent to contact any number of companies to request that they stop sharing that consumer’s personal data, or that they delete it altogether. The infrastructure for an authorized purchasing agent service would be similar in scale to Permission Slip, matching a consumer with multiple companies.

To the extent that bespoke pricing can actually benefit consumers, and can further the pro-competitive objective of expanding the market, by offering a lower price to consumers who need it to afford to purchase, those consumers can still obtain that benefit by checking prices both ways and comparing them.

Sellers might say they need to charge higher prices to some consumers in order to lower the price to other consumers and still obtain the same overall revenue. But in a marketplace where competition is functioning effectively, a seller will still have incentives to identify prospective buyers who would pay a lower price that would still be profitable to the seller.

Conclusion

Bespoke pricing is likely coming soon, to sellers near you – if it has not already arrived. The technological capability is here, and the incentive to use it will be irresistible.[17] We need to come to terms with how to confront it on the consumer side, so that the online marketplace works for consumers as promised when its arrival was heralded. The FTC investigation and the Senate Banking inquiry are good places to start.

[1] G. Slover & H. Babinski, Is Artificial Intelligence a New Gateway to Anticompetitive Collusion, Center for Democracy & Technology, Oct. 2, 2023, https://cdt.org/insights/is-artificial-intelligence-a-new-gateway-to-anticompetitive-collusion/.
[2] D. Dayen, One Person One Price, The American Prospect, June 4, 2024, https://prospect.org/economy/2024-06-04-one-person-one-price/. An analogous concern has arisen regarding companies’ use of workers’ personal data to discriminate in what they are paid. See, e.g., Veena Dubal, On Algorithmic Wage Discrimination, 123 Columbia Law Rev. 1929 (2023), https://www.jstor.org/stable/27264954.
[3] See FTC Issues Orders to Eight Companies Seeking Information on Surveillance Pricing, July 23, 2024 (concurring statement of Commissioner Ferguson), https://www.ftc.gov/system/files/ftc_gov/pdf/surveillance-pricing-6b-ferguson-concurrence.pdf.
[4] See Federal Trade Commission, Behind the FTC’s Inquiry into Surveillance Pricing Practices, July 23, 2024, https://www.ftc.gov/policy/advocacy-research/tech-at-ftc/2024/07/behind-ftcs-inquiry-surveillance-pricing-practices.
[5]  J. Glorfeld, John Wanamaker Makes a Sale, Cosmos, May 2, 2021, https://cosmosmagazine.com/people/john-wanamaker-makes-a-sale/; B. Wallheimer, Are You Ready for Personalized Pricing?, Chicago Booth, Feb. 26, 2018, https://www.chicagobooth.edu/review/are-you-ready-personalized-pricing#.
[6]  See Slover & Babinski, n. 1; The New Invisible Hand? The Impact of Algorithms on Competition and Consumer Rights, Senate Comm. on the Judiciary, Subcomm. on Competition Policy, Antitrust, and Consumer Rights, Dec. 13, 2023, https://www.judiciary.senate.gov/committee-activity/hearings/the-new-invisible-hand-the-impact-of-algorithms-on-competition-and-consumer-rights.
[7] See C. Dilmegani, Ultimate Guide to Dynamic Pricing in 2024: Roadmap & Vendors, AIMultiple, Jan. 3, 2024, https://research.aimultiple.com/dynamic-pricing/.
[8]  Slover & Babinski, n. 1.
[9]  Id.
[10]  Adam Smith, The Wealth of Nations, 1776.
[11] FTC Issues Orders to Eight Companies Seeking Information on Surveillance Pricing, July 23, 2024, https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-issues-orders-eight-companies-seeking-information-surveillance-pricing.
[12]  Press release, Brown Demands Answers on Amazon and Walmart’s Use of So-Called “Dynamic Pricing”, May 9, 2024, https://www.banking.senate.gov/newsroom/majority/brown-demands-answers-on-amazon-and-walmarts-use-of-so-called-dynamic-pricing.
[13]  See, e.g., Testimony of Deirdre Mulligan before the Senate Committee on Commerce, Science and Transportation Subcommittee on Communications, Sept. 23, 1998, https://cdt.org/insights/testimony-of-deirdre-mulligan-before-the-senate-committee-on-commerce-science-and-transportation-subcommittee-on-communications/. CDT has also long been emphasizing that data minimization is a key privacy protection. See, e.g., https://cdt.org/insights/report-why-collection-matters-surveillance-as-a-de-facto-privacy-harm/ and https://cdt.org/insights/states-are-letting-us-down-on-privacy/.
[14]  See T. Noble, To Fight Surveillance Pricing, We Need Privacy First, Electronic Frontier Federation, Aug. 5, 2024, https://www.eff.org/deeplinks/2024/08/fight-surveillance-pricing-we-need-privacy-first.
[15] At some point after the purchase price and terms are agreed to, the seller will need a mailing or email address for the buyer to deliver the product or service.
[16]  K. Waddell, How to Take Back Control of Online Data With Apps Like Consumer Reports’ Permission Slip, Consumer Reports, Oct. 3, 2023, https://www.consumerreports.org/electronics/privacy/take-control-of-online-data-with-apps-a5151057853/.
[17]  See, e.g., D. Dayen, The Emerging Danger of Surveillance Pricing, Jacobin, July 9, 2024, https://jacobin.com/2024/07/surveillance-personalized-pricing-data-collection.

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***

From the letter:

The Internet is an unusual technology because it is fundamentally distributed. It is built up from all of the participating networks. Each network participates for its own reasons according to its own needs and priorities. And this means, necessarily, that there is no center of control on the Internet. This feature is an essential property of the Internet, and not an accident. Yet over the past few years we have noticed a willingness to address issues on the Internet and Web by attempting to insert a hierarchical model of governance over technical matters. Such proposals concern us because they represent an erosion of the basic architecture.

In particular, some proposals for the Global Digital Compact (GDC) can be read to mandate more centralized governance. If the final document contains such language, we believe it will be detrimental to not only the Internet and the Web, but also to the world’s economies and societies.

Furthermore, we note that the GDC is being developed in a multilateral process between states, with very limited application of the open, inclusive and consensus-driven methods by which the Internet and Web have been developed to date. Beyond some high-level consultations, non-government stakeholders (including Internet technical standards bodies and the broader technical community) have had only weak ways to participate in the GDC process. We are concerned that the document will be largely a creation only of governments, disconnected from the Internet and the Web as people all over the world currently experience them.

Therefore, we ask that member states, the Secretary-General and the Tech Envoy seek to ensure that proposals for digital governance remain consistent with the enormously successful multistakeholder Internet governance practice that has brought us the Internet of today. Government engagement in digital and Internet governance is needed to deal with many abuses of this global system but it is our common responsibility to uphold the bottom-up, collaborative and inclusive model of Internet governance that has served the world for the past half century.

Read the full letter + list of signatories.

The post CDT CTO Mallory Knodel Joins Letter Urging UN’s Secretary-General and Envoy on Technology to Uphold Inclusive Model of Internet Governance appeared first on Center for Democracy and Technology.

Our organizations call for hearings and a more deliberative process to assess the adverse consequences of extending copyright coverage in this manner and to explore more appropriate ways to address the concerns of standards development organizations about incorporation of standards into law by reference.

Read the full letter here.

The post Joint Letter to House Rules Committee Opposing Pro Codes Act appeared first on Center for Democracy and Technology.

Whenever you visit a website, your browser has to convert a URL like “www.wikipedia.org” into a string of numbers called an IP address. To do that, your computer or phone has to ask a DNS resolver, a service that works like an internet address book, to provide the IP address of the website you’re trying to visit.

This process is not private by default. Many of us are using a web browser application like Chrome, Firefox or Safari without knowing that our browsing habits could be accessed without us ever knowing, perhaps because the default DNS resolver isn’t incorporating privacy protections. That’s why a global DNS resolver called Quad9 was founded with privacy guarantees baked in from the beginning. Quad9 also provides additional security by not resolving known malware, spyware, spam and phishing URLs.

In an example of CDT playing a critical role in supporting privacy online, CDT chief technology officer Mallory Knodel helped to launch a new human rights advisory council for Quad9. In late April 2024 the announcement of the advisory council coincided with the NetMundial+10 meeting in Sao Paulo, Brazil. This groundbreaking initiative brings together well-respected professionals into a body that will consider the privacy, equity and human rights implications of Quad9’s operations, marking a significant stride towards safeguarding privacy and equity across the service’s global internet architecture.

Quad9, known for its high privacy guarantees and security benefits, is a nonprofit that operates over 240 points of presence in more than 110 countries. Knodel will chair the new council, whose distinguished members reflect Quad9’s global presence. It includes Bob Ochieng of ICANN in Kenya; Pablo Hinojosa of APNIC in Australia; Tara Tarakiyee of the Sovereign Tech Fund in Germany; Serge Droz, board member of FIRST; Lars Eggert, former IETF chair and engineer at Mozilla; Seeta Peña Gangadharan at the London School of Economics and Political Science; Lai Yi Ohlsen of Measurement Lab in New York; Urvashi Aneja at the Digital Futures Lab in India; and Shane Kerr of IBM Amsterdam.

Initiatives that incorporate privacy, security and human rights concerns from the start are all too rare in the technology space, making Knodel’s work with Quad9 and the council particularly important. By embracing initiatives like Quad9 and its human rights advisory council, we not only protect our privacy and security online but also champion trusted providers that are accountable to the public interest.

The post Supporting Internet Privacy from the Ground Up appeared first on Center for Democracy and Technology.

Read the full letter.

The post CDT Joins Others in Letter Supporting Increased Funding for Antitrust Enforcement appeared first on Center for Democracy and Technology.

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Dear Secretaries Blinken and Raimondo and Ambassador Tai:

The below-signed civil rights, civil liberties, and open Internet advocates have championed a free and open Internet while fighting against the harms that emerging technologies may pose for liberty, privacy, and equity. These goals can—and must—be achieved together. While we appreciate President Biden’s steps to address the actual and emerging harms of artificial intelligence, we are concerned that the withdrawal of key commitments at the World Trade Organization and in international trade negotiations will signal that the United States no longer stands by a free and open Internet. We ask that you reiterate the United States’ twin commitments to preserving the Internet as a truly global medium and to retaining its ability to make specific adjustments to allow for critical public policy objectives such as the regulation of algorithmic systems to support privacy and equity.

Late last year, the U.S. Trade Representative withdrew support for a number of commitments at the World Trade Organization that underpin a global, open Internet, including opposing forced data localization, supporting the free flow of information, combatting mandatory transfers of intellectual property, and championing non-discrimination for information products. Advocates and governmental bodies have long championed these commitments as key for fostering human rights and ensuring access to information globally. As former Federal Communications Commissioner Michael Copps observed in early net neutrality debates over two decades ago, these commitments reflect the recognition that “Internet openness and freedom are threatened whenever someone holds a choke-point that they have a legal right to squeeze. That choke-point can be too much power over the infrastructure needed to access the Internet. And it can also be the power to discriminate over what web sites people visit or what technologies they use.” Those concerns apply whether the discriminatory power is exercised by private power or public authorities.

The United States’ withdrawal of its commitments may be read to signal an abandonment of those principles of openness, freedom, and non-discrimination:

• Data localization. Data localization requirements may be abused to disfavor foreign companies and speakers and undermine the functioning of a global, interoperable Internet by upending the ways in which data can flow across borders. Data localization places personal data “firmly within reach of governments,” creating unique risks for people’s privacy, free expression, access to information, and other fundamental freedoms. Data localization efforts can also exacerbate cybersecurity concerns by requiring duplication of the servers and data localized in each jurisdiction. Those cybersecurity vulnerabilities may make data more vulnerable to foreign surveillance and privacy breaches, while failing to address sophisticated attacks that do not rely on the foreign transfer of data.
• Restrictions on cross-border flows of information. International flows of information are essential for people in the United States and around the world to participate in global discourse and commerce, and broad limitations on those data flows would restrict their ability to access content from across the globe.
• Forced disclosure of source code. The forced disclosure of products’ source code may undermine intellectual property rights, privacy, and security. An entity that is required to disclose source code “may fear theft of its IP” and its transfer to a competing entity. Mandated disclosure of source code may likewise allow adversaries to identify and exploit security and privacy vulnerabilities. Although the United States should commit to protecting against forced transfers and exploitation of source code, those commitments should still permit sufficient transparency around algorithmic systems to guard against discrimination and other harms, as discussed below.
• Discrimination against foreign digital products. Nondiscrimination has long been a keystone in U.S. digital policy, ensuring that individuals, not governments or infrastructure providers, ultimately choose what information is created and accessed. This principle enables individuals to choose the best products and platforms for their needs—including those that have better content moderation or privacy policies.

Abandoning those commitments can result in concrete harms. For example, data localization mandates might impact a global service like Wikipedia (the free online encyclopedia created and maintained by volunteers around the world) and its users worldwide. Over the past decade, the Wikimedia Foundation (the nonprofit that hosts Wikipedia) has received an increasing number of requests to provide user data to governments and wealthy individuals, who wish to censor accurate public information or to identify and take retaliatory action against the volunteers editing Wikipedia. These mandates would worsen this trend by subjecting the data of vulnerable individuals to direct seizure by authorities that do not respect human rights.

Besides threats to privacy, free expression, and even the safety of Wikipedia volunteer editors, the financial costs of establishing data collection and storage facilities in countries around the world would threaten the economic viability of nonprofit, small businesses, and larger commercial entities alike.

Growing requirements for data localization are happening alongside a global crackdown on free expression. And people’s personal data—which can reveal who they voted for, who they worship, and who they love—can help facilitate this. Rwanda’s data protection law, for instance, mandates that companies store data locally unless the country’s non-independent cybersecurity regulator approves otherwise. This requirement leaves personal data easily accessible in an environment in which authorities have embedded agents in telecommunications companies and used data from private messages to prosecute dissidents. Similarly, in Uzbekistan, authorities temporarily blocked Skype, TikTok, Twitter, VKontakte, WeChat, and other popular platforms due to their noncompliance with a data localization law, severely limiting people’s ability to communicate and access information. Rwanda and Uzbekistan are not outliers. 78 percent of the world’s Internet users live in countries where simply expressing political, social, and religious viewpoints leads to legal repercussions. The United States should maintain its longstanding opposition to these requirements.

While there are a range of reasons companies have resisted data localization requirements, some are at least in part doing so over concerns they will be complicit in government repression. When data is not stored locally, the respective government often must go through a legitimate—albeit far from perfect—legal process for accessing the information from U.S. companies. But when data is stored on local servers, the ability for companies to resist problematic state demands is hampered. This challenge is further compounded by the emergence of so-called hostage-taking laws, in which international companies are required to have a local presence in a particular country, curbing their willingness to push back against user data requests over concerns for employee safety.

Nonetheless, firm commitment to a free and open Internet does not mean surrender to an unregulated Internet. For example, U.S. civil rights statutes apply to foreign entities that discriminate against individuals in the United States, and neither housing data abroad nor engaging in international data flows will undermine domestic regulation of discriminatory algorithmic decision-making. Regulations of data and AI such as the European Union’s General Data Protection Regulation and the California Consumer Privacy Act became law years ago, and there has been no credible challenge under international trade law to either, despite pro-business commentary insisting as much.

Moreover, well-scoped exceptions in treaty language can help protect regulatory goals in regulation of data and AI. International digital trade agreements have long sought to accommodate legitimate public policy objectives. For example, the USMCA recognized an exception to its prohibition on restricting cross-border data flows to “achieve a legitimate public policy objective.” Well-scoped exceptions in negotiations at the WTO and elsewhere may similarly allow for flexibility for domestic regulation to address emerging harms; indeed, some of the signatories of this letter have recognized the need to ensure that international agreements do not “thwart” algorithmic impact assessments and audits.

Similarly, Congressional leaders have recognized that source code protections should “ensure that countries [cannot] force businesses to surrender their source code or share it with domestic competitors as a condition of doing business, while preserving the ability of governments to access source code to achieve legitimate public policy objectives, such as conducting investigations and examinations and promoting consumer health and safety.” Long-standing U.S. policy supporting an open Internet is fully consistent with exceptions to achieve these legitimate public policy objectives.

But these exceptions should be concrete and appropriately scoped. The United States should lead both in establishing thoughtful regulations to support equity and privacy and in protecting an open and free Internet. The United States should clarify immediately that both sets of goals remain at the heart of U.S. policy.

We thank you for your consideration.

Read more from ITIF + a full list of signatories.

[ PDF Version ]

The post CDT Joins Coalition Letter to the Biden Administration on Protecting the Free and Open Internet appeared first on Center for Democracy and Technology.

Opposition to the Pro Codes Act will help ensure that copyright law is not exploited to create a monopoly in which private standards development organizations (SDOs) control access to the codes and regulations that govern public health and safety.

We urge Congress to engage with our organizations and the public to meet its ostensible goal of making mandatory regulations available online for free so people can know, share, and comment on them. Pro Codes will only serve to unnecessarily ration public access to U.S. law.

Read the full letter.

The post CDT Joins Others in Letter Opposing the Pro Codes Act appeared first on Center for Democracy and Technology.