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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 3686 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  2d Session
                                S. 3686

     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 30, 2024

Ms. Klobuchar (for herself, Mr. Wyden, Mr. Durbin, Mr. Blumenthal, Ms. 
 Hirono, and Mr. Welch) 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 2024''.

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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