Price fixing gone rampant

Matt Stoller

It’s not just that prices are high, it’s that they are increasingly unfair.

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A couple of antitrust cases over the last month are suggesting that concentration may have played a more significant role than commonly understood, but we just don’t have the data to measure it. 

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There are several key questions here. One is whether this kind of collusion is systemic across the economy. I suspect it is.

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What’s fascinating is that here again, an economist would look at these markets and see competition and multiple rivals renting out apartments, but they would miss that there’s a cartel, or rather a set of regional cartels coordinated by a software platform, operating to boost prices and margins.

Sometimes the price-fixing is done through software and data exchange, and sometimes it’s done through signaling in concentrated markets. In its recently filed complaint against Amazon, for instance, the Federal Trade Commission touched on something called Project Nessie, an internal algorithm “to test how much it could raise prices in a way that competitors would follow.” Amazon would raise a price to see if competitors followed, and then keep the price high if they did, or drop it back down if they didn’t.