The Rise of Algorithm Hyperpowers: A Transatlantic Comparison of Legal Structures and Regulatory Policies

Tim W. Dornis

Private transactions are increasingly taking place online. Platforms like Amazon and eBay have billions of website visits and hundreds of millions of transactions each month. In the process, they extensively collect their customers’ data, which brings them extreme power: The platforms know their customers better than customers know themselves and can nudge them into almost any direction. As a consequence, consumers’ self-determination is increasingly coming under merchants’ sway. This leads to platforms enjoying “algorithm hyperpowers”—in other words, the power resulting from each single merchant-customer relationship will agglomerate across the virtual infinity of individual transactions. In the end, from the multiple micro-asymmetries, a large and excessive macro-asymmetry is emerging. It divides the marketplace – the masters on the supply side and servants on the demand side. The former are algorithmically enabled not only to predict their customers’ demand far into the future but also to trigger transactions at their will, thereby literally “planning” and “steering” entire markets as they wish. In a sense, the marketplace has become little more than a cascade of preconceived transactions, a self-fulfilling algorithmic prophesy. It seems that Friedrich von Hayek’s anti-liberal nightmare has come true.

This project considers the legal implications of the impending cataclysm from a transnational, comparative, and interdisciplinary perspective. First is the issue of the individual loss of privacy and the collection and processing of personal data. The big-data-powered leverage of merchants means that freedom of contracting is being eroded, leaving consumers in a state of extreme vulnerability. In addition, under a larger lens, issues of antitrust and unfair competition law come to light. Yet, as illustrated by the incipient debate on how to handle Silicon Valley’s Big Tech, there is a general lack of consensus on what direction to take. Finally, even less clarity exists with regard to whether more immediate regulation of online platforms’ transactional hyperpowers of targeting, manipulating, and market steering is necessary and how such regulation might be implemented. Combining the many different perspectives that a holistic analysis requires, this project explores the fundamental aspects that must be considered by policymakers and regulators seeking to respond to the big-data-driven algorithmic marketplace transformation that is surfacing before our eyes.