E-commerce Law: Price Scraping Can Lead To Legal Troubles

April 11, 2017

Price scraping tools help companies match competitors’ prices. But be warned: using them can lead to FTC anti-competition allegations.

What Is Price Scraping?

Price scrapping programs mine product and pricing information from competitor websites. Popular brands include Upstream Commerce and Mozenda. Typically, businesses use them to ensure that their prices stay in-line with the market; some companies manually change prices based on the price scraping data, while others set it up to change automatically, based on a predetermined metric.

Though helpful to many businesses, the problem with these systems is twofold.

  1. Businesses that become overly dependent on the price scraping data may not develop their own (potentially more profitable) sale program and only lower prices when competitors do.
  2. The FTC may classify excessive price scraping initiatives as anti-competitive since one company’s price increase has a market-wide ripple effect. In a market in which demand is inelastic, one company’s price increase could result in all of the companies raising their prices if all are using a similar price-scraping software.

While regulations have not yet been put into effect to control online price-scraping technologies in the U.S., some regulatory efforts in the European Union have already begun, leading an FTC attorney to believe that it is only a matter of time before the use of these technologies falls under similar scrutiny in the U.S.

Potential Antitrust Problems

E.U. authorities have opened two investigations into companies that have allegedly used price scraping tools for anti-competitive reasons. Though U.S. authorities have yet to follow suit, the potential for private antitrust litigation looms.

Take Uber. The ride share company is currently on the hot seat for its price surge algorithm. Some people say it’s a price-fixing scheme. Why? Because the algorithm reportedly manipulates price based on the demand of all Uber drivers in a given area.

Uber’s case is similar to a DOJ action targeting online poster sellers. In that case, several poster companies agreed to use the same algorithm to standardize prices. What made the case slightly different, however, was that it featured a prior agreement.

Potential Robinson-Patman Problems For Distributors

The Robinson-Patman Act forbids sellers for charging buyers who are competing for products different prices for the same products. If that occurs, a buyer who is disfavored by the use of the pricing algorithm may be able to successfully sue the company under the Robinson-Patman Act.

The FTC has decreased its enforcement of violations under the Robinson-Patman Act in the past few years. Before the presidential election, however, some folks were calling for stepped-up enforcement. Even if the FTC does not pursue enforcement, private actors still could file lawsuits.

A longstanding Supreme Court decision barred manufacturers from forcing distributors to charge specific prices. To get around it, manufacturers started the “suggested retail price” program. And though the Supreme Court overturned that decision in 2007, companies must still contend with state laws that forbid vertical price-fixing.

Price scraping tools aren’t all bad. However, as FTC attorneys, we advise companies to be careful with pricing algorithms. Again, though the Federal Trade Commission may not take action, the risk of private antitrust lawsuits may simply outweigh the potential benefits.

Connect With An FTC Lawyer About A Price Scraping Matter

Do you have a price scraping question? Want to make sure your pricing algorithm complies with federal, state, and local laws? Our e-commerce legal team can do that for you. Get in touch today.

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