Sens. Louis Blessing III, R-Colerain Township, and Willis Blackshear Jr., D-Dayton, have proposed legislation that would amend the state’s antitrust law to target algorithmic price fixing.

Senate Bill 79 would make the use and distribution of a pricing algorithm that uses non-public competitor data a violation of the Valentine Act, the state’s antitrust law which was enacted to support fair competition in the marketplace.

“In the United States and Ohio, it is very much illegal for a bunch of business owners to walk into the proverbial smoke-filled room and agree not to undercut one another and keep prices as high as possible,” Blessing said during a Financial Institutions, Insurance and Technology Committee hearing in the state Senate. “This is as it should be because these higher prices harm the economy as a whole and prevent competition from reducing prices and spurring innovation. However, what happens when the smoke-filled room doesn’t physically exist, but instead is replaced with a large database and sophisticated algorithms?”

The Hamilton County lawmaker said the action is de facto price fixing, noting that current law is unclear on the matter and in need of clarification.

“Currently companies have a range of tools that they can use to help them determine the best rate to offer their products and services in the market,” Blackshear said. “Any well-run business understands how their products and services compare to their competitors in a given industry.”

He said a business enterprise that has direct access to private information about their competitors and then colludes with them to raise prices is acting contrary to the spirit of the law.

“One specific industry in which we see considerable price fixing and the use of algorithms is the apartment rental industry,” he continued. “The companies that own apartment complexes often contract with the same software companies to determine optimal rates to charge tenants. This leads to landlords within the same geographical area using data to effectively fix prices and raise rates on consumers.”

Blackshear cited a White House report from December that showed pricing algorithms can add an average of $70 per month to the cost of rent in algorithm-utilizing buildings.

“That same study also found that several major metropolitan areas nationwide had over 30 percent of landlords utilizing the same rental pricing software,” creating a “ripple effect” throughout the market.

SB 79 would establish guidelines for the circumstances in which a court must presume the defendant entered into an agreement, contract, combination or conspiracy against trade, analysis of the bill provided.

The bill also would authorize the attorney general to issue investigative demands of documentary material, including information about the development or distribution of a pricing algorithm, information about the person responsible for its development or distribution and how the pricing algorithm functions.

Blessing noted that algorithmic price fixing is not relegated to the real estate industry.

“It could very easily be applied to wages,” he said. “If an enterprising software company were to use the same model, they could create a profitable business that is used to lower wages for its client businesses. Again, the combination of non-public data, operational scale and sophisticated algorithms could achieve significant monopsony power for the business community at large, essentially allowing for them to operate as a single large employer.”

Blackshear said the use of artificial intelligence has exacerbated the issue.

“The expanded use of AI technology and the popularity of common AI models makes it increasingly likely that two companies or individuals can use the same software to formulate prices for their businesses,” he said. “We need to resolve this issue by clarifying the prohibition of price-fixing algorithms in our state to stop this practice from continuing.”

SB 79 awaits further consideration by the committee.