The Potential Pitfalls of AI Market Insight Tools in Agriculture

One of the ways that artificial intelligence (AI) has been marketed to agricultural business owners is as a tool to improve market competitiveness. AI platforms promise to deliver real-time market insights in a way that humans never could, since AI has the ability to analyze much larger datasets than any single person. However, there is a concern that such market insight tools might actually lead to price-fixing problems—illegal conduct under US law—rather than an increase in competitiveness.

Understanding Illegal Price Fixing

Price fixing in the legal sense originates from the Sherman Antitrust Act of 1890. Under Section 1 of the Act, in order to demonstrate illegal price-fixing conduct, a plaintiff must demonstrate that an injury resulted from: “(1) the existence of a contract, combination, or conspiracy among two or more separate entities that (2) unreasonably restrains trade and (3) affects interstate or foreign commerce.” For the purposes of this post, let’s focus on two of those elements: First, there must be some “agreement” by sellers to fix prices. Second, that agreement must be with competitors. “Competitors” are those persons or entities engaged in similar lines of business, competing for sales with similar customers.

Potential Risks of AI Tools in Creating Price Fixing

There are many AI tools on the market already that promise market insight from data collected from various competitors in the same market. While these competitors would not agree to share their market data directly with another competitor, as that could be viewed as an agreement to fix prices, these competitors might agree to anonymously share their market data with a third-party AI tool which then shares market intelligence with its users.

An example is already underway in the real estate rental market. Using different online platforms, landlords in various cities and markets all agree to share information about their rental spaces, such as rent, vacancies, operating costs, and other information reported to a central data exchange platform. The platform uses algorithms to provide insights to landlord users, advising them that their rent is lower than average in the market space. This could potentially lead to landlords raising rent and tenants paying more than they would have in a competitive market. Is this an agreement to fix rental prices?

Legal Implications of AI Pricing Tools

We are seeing litigation on these AI-influenced rental markets start to unfold in the courts. A recent case by the Justice Department and ten states against RealPage, Inc., an online platform offering landlord “revenue management” software, has claimed that such software and its use by landlords has resulted in illegal price fixing harming tenants. Courts are wrestling with whether such rent sharing constitutes illegal price fixing because AI data sharing tools lack the traditional “agreement” between competitors. The users of the platform set prices according to the information learned through using the tool, raising questions about implied agreements among competitors.

Conclusion

The outcome of the rent-sharing cases will be important for AI developers and farmers. Agricultural goods and commodities are highly competitive, and the use of similar “revenue management” platforms in agriculture might be viewed as anti-competitive by farmers. The implications of such cases on the agricultural industry remain to be seen, but it is clear that the use of AI tools in market insights must be carefully monitored to avoid potential legal pitfalls.