[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 232 Introduced in Senate (IS)]
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119th CONGRESS
1st Session
S. 232
To prevent anticompetitive conduct through the use of pricing
algorithms by prohibiting the use of pricing algorithms that can
facilitate collusion through the use of nonpublic competitor data,
creating an antitrust law enforcement audit tool, increasing
transparency, and enforcing violations through the Sherman Act and
Federal Trade Commission Act, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 23, 2025
Ms. Klobuchar (for herself, Mr. Wyden, Mr. Durbin, Mr. Welch, Ms.
Hirono, Mr. Lujan, Mrs. Shaheen, Mr. Murphy, and Mr. Blumenthal)
introduced the following bill; which was read twice and referred to the
Committee on the Judiciary
_______________________________________________________________________
A BILL
To prevent anticompetitive conduct through the use of pricing
algorithms by prohibiting the use of pricing algorithms that can
facilitate collusion through the use of nonpublic competitor data,
creating an antitrust law enforcement audit tool, increasing
transparency, and enforcing violations through the Sherman Act and
Federal Trade Commission Act, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Preventing Algorithmic Collusion Act
of 2025''.
SEC. 2. DEFINITIONS.
In this Act:
(1) Antitrust laws.--The term ``antitrust laws''--
(A) has the meaning given that term in subsection
(a) of the first section of the Clayton Act (15 U.S.C.
12); and
(B) includes section 5 of the Federal Trade
Commission Act (15 U.S.C. 45).
(2) Commercial terms.--The term ``commercial terms''
means--
(A) level of service;
(B) availability;
(C) output, including quantities of products
produced or distributed or the amount or level of
service provided; or
(D) rebates or discounts made available.
(3) Commission.--The term ``Commission'' means the Federal
Trade Commission.
(4) Distribute; distribution; distributing.--The terms
``distribute'', ``distribution'', and ``distributing'' include
selling, licensing, providing access to, or otherwise making
available by any means, including through a subscription or the
sale of a service.
(5) Nonpublic competitor data.--The term ``nonpublic
competitor data''--
(A) means nonpublic data that is derived from or
otherwise provided by another person that competes in
the same market as a person, or a related market; and
(B) does not include information distributed,
reported, or otherwise communicated in a way that does
not reveal any underlying data from a competitor, such
as narrative industry reports, news reports, business
commentaries, or generalized industry survey results.
(6) Nonpublic data.--The term ``nonpublic data'' means
information that is not widely available or easily accessible
to the public, including information about price, commercial
terms, and related products or services, regardless of whether
the data is attributable to a specific competitor or
anonymized.
(7) Person.--The term ``person'' has the meaning given that
term in subsection (a) of the first section of the Clayton Act
(15 U.S.C. 12).
(8) Price.--The term ``price'' means the amount of money or
other thing of value, whether tangible or not, expected,
required, or given in payment for any product or service,
including compensation paid to an employee or independent
contractor for services provided.
(9) Pricing algorithm.--The term ``pricing algorithm''
means any computational process, including a computational
process derived from machine learning or other artificial
intelligence techniques, that processes data to recommend or
set a price or commercial term that is in or affecting
interstate or foreign commerce.
SEC. 3. COMPETITION LAW ENFORCEMENT AUDIT.
(a) In General.--A person using or distributing a pricing
algorithm, upon a written request by the Attorney General or the
Commission, shall, not later than 30 days after the date of the written
request, or any later date approved by the Attorney General or the
Commission, respectively, provide to the Attorney General or the
Commission, respectively, a written report on each pricing algorithm
identified in the request.
(b) Report Contents.--Each report under subsection (a) shall
include--
(1) information on whether the person is responsible for
the development or distribution of the pricing algorithm, or
whether a third party is responsible for the development or
distribution of the pricing algorithm, including the identity
and contact information of any other person responsible for the
development or distribution of the pricing algorithm;
(2) information on whether the pricing algorithm
autonomously sets prices or commercial terms and whether there
is human review of any recommendation or decision of the
pricing algorithm;
(3) an explanation of the rules or processes that the
pricing algorithm uses to set or recommend prices or commercial
terms;
(4) a description of all data the pricing algorithm uses to
set or recommend prices or commercial terms, including data
used to train the algorithm;
(5) all sources and collection processes, including the
frequency of collection, of any data that the pricing algorithm
uses to set or recommend prices or commercial terms;
(6) whether the pricing algorithm engages in price
discrimination by setting or recommending different prices or
commercial terms for--
(A) different customers seeking identical or nearly
identical products or services, and if so, the factors
used in differentiating among such customers; or
(B) different employees or independent contractors
providing substantially similar services, and if so,
the factors used in differentiating among such
employees or independent contractors; and
(7) any changes made to the pricing algorithm between the
date of receipt of the request under subsection (a) and the
date of certification under subsection (c).
(c) Certification of Report.--The Chief Executive Officer, Chief
Economist, Chief Technology Officer, or a corporate officer of similar
authority of a person shall certify, under penalty of perjury, the
accuracy of a report under subsection (a) submitted by the person.
(d) Confidentiality.--All information submitted in a report under
subsection (a) shall be treated as confidential and shall be considered
to be privileged and confidential trade secrets and commercial or
financial information exempt under subsection (b)(4) of section 552 of
title 5, United States Code, from being made available to the public
under subsection (a) of that section.
(e) Information Sharing.--
(1) In general.--A report under subsection (a) may be
shared--
(A) between the Department of Justice and the
Commission; and
(B) with the National Institute of Standards and
Technology for technical assistance in understanding
the report.
(2) Limitation.--The National Institute of Standards and
Technology shall not disclose the contents of a report shared
under paragraph (1) or the analysis of the report by the
National Institute of Standards and Technology to any person,
except the Department of Justice or Commission, whichever
sought the technical assistance.
(f) Rules of Construction.--Nothing in this section shall--
(1) limit the ability of the Commission or the Attorney
General to issue a civil investigative demand, to issue a
subpoena, to seek discovery in the course of litigation, or
otherwise obtain information through other means available to
the Commission or the Attorney General; or
(2) restrict the use of information submitted in a report
under subsection (a) in the course of a formal investigation,
enforcement action, litigation, trial, or other proceeding, in
accordance with the confidentiality procedures applicable to
such proceeding.
SEC. 4. PREVENTING COLLUSIVE ACTIVITY IN PRICING ALGORITHMS.
(a) In General.--It shall be unlawful for a person to use or
distribute any pricing algorithm that uses, incorporates, or was
trained with nonpublic competitor data.
(b) Civil Action.--If the Commission or the Attorney General has
reason to believe that a person has violated subsection (a), the
Commission, in its own name by any of its attorneys designated by it
for such purpose, or the Attorney General may bring a civil action
against the person in an appropriate district court of the United
States to seek to recover--
(1) a civil penalty of--
(A) not less than $10,000, adjusted for inflation
on the basis of the Consumer Price Index, for each day
during which the violation occurs or continues to
occur; or
(B) the sum of the price of each product or service
sold using the pricing algorithm in violation of
subsection (a); and
(2) other appropriate relief, including an injunction or
other equitable relief.
(c) Effective Date.--Subsection (a) shall take effect on the date
that is 90 days after the date of enactment of this Act.
SEC. 5. ALGORITHMIC PRICE FIXING.
(a) Presumption of Agreement.--With respect to the use of a pricing
algorithm that would violate section 4 of this Act, there shall be a
presumption for purposes of section 1 of the Sherman Act (15 U.S.C. 1)
that the defendant entered into an agreement, contract, combination, or
conspiracy in restraint of trade and for purposes of section 5(a) of
the Federal Trade Commission Act (15 U.S.C. 45(a)) that the defendant
has engaged in an unfair method of competition if the plaintiff
establishes that--
(1) the defendant distributed the pricing algorithm to 2 or
more persons--
(A) with the intent that the pricing algorithm be
used to set or recommend a price or commercial term of
a product or service in the same market or a related
market; or
(B) and 2 or more persons used the pricing
algorithm to set or recommend a price or commercial
term of a product or service in the same market or a
related market; or
(2)(A) the defendant used the pricing algorithm to set or
recommend a price or commercial term of a product or service;
and
(B) the pricing algorithm was used by another person to set
or recommend a price or commercial term of a product or service
in the same market or a related market.
(b) Rebuttal.--The presumption under subsection (a) shall not apply
to a defendant if the defendant did not develop or distribute the
pricing algorithm and the defendant demonstrates by clear and
convincing evidence that the defendant did not have actual knowledge or
could not have reasonably known that the pricing algorithm used
nonpublic competitor data.
(c) Joint and Several Liability.--In a civil case in which the
presumption under subsection (a) is applicable, any persons that
distributed the pricing algorithm and knew, or could reasonably have
known, that the pricing algorithm would use, incorporate, or be trained
with nonpublic competitor data shall be jointly and severally liable
for any violation of section 1 of the Sherman Act (15 U.S.C. 1) or
section 5(a) of the Federal Trade Commission Act (15 U.S.C. 45(a)).
(d) Relation to Antitrust Laws.--Nothing in this section shall
impair or limit the applicability of the antitrust laws.
(e) Effective Date.--Subsection (a) shall take effect on the date
that is 90 days after the date of enactment of this Act.
SEC. 6. TRANSPARENCY IN PRICING ALGORITHMS.
(a) In General.--Any person that has $5,000,000 or more in annual
revenue that uses a pricing algorithm to recommend or set a price or
commercial term shall clearly disclose, as applicable--
(1) to a customer, before the customer purchases the
relevant product or service, that the price or a commercial
term, as applicable, is set or recommended by a pricing
algorithm; and
(2) to a current or prospective employee or independent
contractor that the price or a commercial term for services
rendered as an employee or independent contractor is set or
recommended by a pricing algorithm.
(b) Additional Disclosures.--
(1) Price discrimination.--If applicable, a disclosure
under subsection (a) shall state that the pricing algorithm
sets or recommends different prices or commercial terms for--
(A) different customers seeking identical or nearly
identical products or services; or
(B) employees or independent contractors providing
substantially similar services.
(2) Third-party algorithm.--If applicable, a disclosure
under subsection (a) shall--
(A) state that the pricing algorithm was developed
or distributed by a person other than the person making
the disclosure; and
(B) provide the identity of the person that
developed or distributed the pricing algorithm.
(c) Enforcement.--Failure to provide a disclosure under subsection
(a), including the information required under subsection (b), shall
constitute an unfair or deceptive act or practice under section 5 of
the Federal Trade Commission Act (15 U.S.C. 45).
(d) Civil Action.--If the Commission has reason to believe that a
person has violated subsection (a) or (b), the Commission, in its own
name by any of its attorneys designated by it for such purpose, may
bring a civil action in an appropriate district court of the United
States to recover--
(1) a civil penalty of not less than $5,000, adjusted for
inflation on the basis of the Consumer Price Index, for each
day during which the violation occurs or continues to occur;
and
(2) other appropriate relief, including an injunction or
other equitable relief.
(e) Relation to Antitrust Laws.--Nothing in this section shall
impair or limit the applicability of the antitrust laws.
SEC. 7. FTC STUDY.
Not later than 2 years after the date of enactment of this Act, the
Commission shall publish the results of a study of the use of pricing
algorithms, including information on--
(1) the prevalence of pricing algorithms;
(2) the frequency of the use of pricing algorithms to
engage in price or wage discrimination;
(3) the potential for persons to use pricing algorithms to
engage in behavior that increases prices, lowers wages, reduces
output, lowers quality, deters innovation, or otherwise harms
the competitive process outside of the price fixing context;
(4) the potential benefits or efficiencies of pricing
algorithms;
(5) any industries, sectors, or markets in which pricing
algorithms may warrant additional oversight or regulation to
protect competition and consumers; and
(6) recommendations for additional legislation, regulation,
or rulemaking relating to competition and consumer protection
issues arising from the use of pricing algorithms.
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