In the Antitrust Utopia of market economies, every buyer and seller possesses perfect information, supply and demand effortlessly align, and consumers bask in the bliss of low prices and perfect competition.
Unfortunately, this view is neither realistic nor Utopian—it is naive.
In the real world, knowledge itself is scarce and often priceless. Decisions are made not by omniscient actors but by imperfect, adaptive humans grappling with incomplete information.
A long, long time ago, I embarked on the quest to understand how knowledge is created and embodied in new products.
As a graduate student, I often trudged through several feet of snow and weathered the cold winds at the University at Buffalo to get to Lockwood Library. Combing through card catalogs and squinting at microfiches of the Thomas Register of American Manufacturers, I manually tracked what firms offered which key innovative products during much of the 20th century. Compiling the trends in prices and quantities of these products from various public and private sources was yet another heroic undertaking.
And while I did not have to punch cards to feed into a mainframe computer, the data analysis on the state-of-the-art Vax machines still took hours, if not days, to produce meaningful insights.
Today, my own graduate students shudder at this as a prehistoric and dystopian image. After all, they have at their disposal $800 smartphones that are 900 million times faster than the $200,000 computer that guided the Apollo missions to the moon.
In the world we live in, thankfully, innovation spurs creative destruction.
However, not appreciating the role of market dynamism, Antitrust law enforcers often cry anti-competition and collusion. They allege price-fixing in several markets, ranging from meat processing to real estate management .
Consider, for example, the lawsuit filed in August 2024 by the Department of Justice (DOJ) and many state attorney generals against RealPage, which provides AI-driven pricing software for landlords and property management companies. Several consumer class action lawsuits have followed.
The lawsuits claim that the RealPage algorithm enables collusion and price gouging. But these allegations get at least four principles wrong.
Innovation is the engine driving human progress As my dissertation, along with those of my students consistently show, economies progress because of human enterprise, propelled by the strategic quest for better, faster, or cheaper solutions to existing needs.
Pioneers introduce new innovations. This sparks a cascade of competitive responses leading to a broader adoption, exponential increases in variety and quality and equally dramatic declines in prices.
Such a diffusion of innovation is directly tied to social wellbeing, as documented in research I have coauthored with my high-powered graduate students. In health care for instance, innovations in medical devices and treatments have slashed mortality rates. In agriculture, improved seed technologies have bolstered food security. In finance, digital tools have enabled millions of the global poor to access banking services for the first time.
The same principle is at play in markets powered by artificial intelligence, which are just taking off.
Yet, antitrust enforcers often fail to grasp this dynamic. They wield lawsuits like blunt instruments, alleging anti-competitive practices.
Information is neither ubiquitously available, nor often free Markets are efficient to the extent that there is information diffusion. When buyers and sellers lack visibility into their options, inefficiencies arise.
If you took a job at $15 an hour because you did not know someone else would pay you $20 for the same work, you have undervalued your time. You would be willing to pay an upfront fee to buy the relevant information, so long as the higher hourly wage offsets the fee. And charging the market rate for your time would not be anti-competitive.
If you were thinking of selling a used car for $3000, and then find other sellers on the Facebook platform are charging $5000 for cars from the same year and model and in the same condition, you have undervalued what you own. Increasing your asking price to match theirs would not be collusion.
Access to better information enables smarter pricing decisions.
RealPage’s algorithms serve this exact purpose, aggregating disparate data on rental markets—location, quality, unit size—and providing landlords a clearer picture of prevailing conditions. If these tools cause rental prices to converge, it reflects efficient information diffusion, not price-fixing or collusion.
Efficient diffusion of information is just as likely to decrease prices, particularly in the longer term Current day prices reflect current forces of demand and supply at work. Critics often cherry-pick data to support claims of price-gouging, pointing to only those instances where rents have risen and ignoring locations that experienced a price decline.
Research by University of Pennsylvania scholars Calder-Wang and Kim documents that the use of algorithmic tools helped property managers better respond to changing market conditions. In markets experiencing economic downturn, they found that landlords using algorithmic tools lowered rents more rapidly than those relying on manual processes.
Similarly, when prices spike due to excess demand, those same algorithms signal profit opportunities that incentivize new supply. Absent zoning restrictions and other such barriers to entry, new properties emerge to meet local demand. In the College town that I live in, for example, property redevelopment has changed the face of Route 1, replacing dilapidated and unsafe buildings to provide housing options that accommodate diverse needs.
Nor are the new AI tools only at the purview of landlords. They also empower renters, providing free access to market data and, increasingly, personalized search tools. A simple web query already yields free AI-generated information on rental prices by location, unit type, and square footage. And Zumper has just launched “Zoe,” a new AI assistant that offers 24/7 support to educate renters, facilitate their search and manage the renting process.
Lawsuits increase uncertainty and reduce incentives to engage in future innovation The Department of Justice announced that it would end the criminal probe against RealPage . However, its antitrust allegations regarding algorithm-driven collusion was upheld in another case under the “per se ” theory that deems actions perceived as price-fixing as illegal without requiring intent or proof of harm. Even for RealPage, the termination of the criminal probe is not a “get-out-of-jail free” card, given pending state and civil lawsuits and the ongoing civil complaint on the federal level.
This regulatory uncertainty saps the time, energy, and resources of firms operating at the cutting edge of technology. As my research with Mahka Moeen and Sonali Shah demonstrates, startups in nascent industries already face significant challenges: technological risks, market adoption hurdles, and ecosystem dependencies. Piling on lawsuits creates a chilling effect on follow-on incentives and investments.
Not getting the above principles right can create peril for us all AI-based algorithms are not the enemy. Nor are the creators of these tools.
As a thought experiment, just imagine surviving the COVID-19 pandemic without the turn of the 21st-century innovations: no mRNA vaccines or telemedicine for healthcare. No Zoom or Teams for virtual work. No home-delivery by Amazon or Instacart. No streaming of entertainment to retain our sanity.
Innovators who build on new scientific principles by combining purpose and profit deserve our gratitude for creating consumer surplus. Instead, antitrust allegations brand them with a scarlet letter.
This portends for a bleak future. Should the innovative producers shrug, we as consumers lose their purposeful quest for a better future.
In that dystopian world, there will be no creation. Only destruction and therefore, decline.
Rajshree Agarwal, Rudolph Lamone Chair of Strategy and Entrepreneurship Rajshree Agarwal is the Rudolph Lamone Chair of Strategy and Entrepreneurship and Director of the Ed Snider Center for Enterprise and Markets at the University of Maryland.
