Between Efficiency and Illegality: The Competitive Implications of Surveillance and Algorithmic Pricing

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Abstract

This paper examines the competitive implications of algorithmic pricing and commercial surveillance technologies, which are increasingly central to strategic conduct in digital markets and regulatory concern. We begin by surveying recent enforcement actions and legislative developments, including the FTC’s ongoing investigation into surveillance-based pricing and proposed state-level regulatory interventions. We next develop a conceptual framework that distinguishes among gains in productive efficiency, allocative improvements via price discrimination with accompanying distributional considerations, and the potential for algorithmic tools to facilitate both explicit and tacit forms of collusion. We then clarify mechanisms highlighted in the literature and focus on environments such as hub-and-spoke architectures and the independent deployment of pricing algorithms. The paper concludes with a set of policy recommendations, including both novel proposals and insights drawn from recent academic work, aimed at guiding competition enforcement in increasingly automated and data-rich markets.