In the past, many businesses hired employees whose role was deciding which prices to charge for their goods or services. At one point, organizations largely set prices based on their costs, though over time they tend to look at their competitors and set similar prices. If, however, management from multiple companies went into a room and determined prices, this would be price-fixing.
Price fixing is illegal. In many countries, we would not allow different companies to work together in a way that might reduce competition or take advantage of consumers. However, that might be a struggle in the future as we find companies using various services to help them manage their systems.
In this case, a few different Las Vegas hotels used the same company to help them decide how to price their rooms. Rainmaker is a revenue management platform, which uses lots of data to help hotels price their rooms in a way that maximizes their revenue. That sounds great, but if this company is successful and many of their clients are in the same location, this is really a way of sharing data by proxy. The hotels are being sued because of their use of this platform.
This one of the problems (or advantages) of lots of data. It allows information to be drawn out of data that wouldn’t otherwise be obvious. Certainly, lots of companies look at their competitors and make decisions based on what they see. I’m certain there are lots of people inside airlines constantly checking the prices of their competition. However, they are gathering this data independently and making their own decisions. If Rainmaker were used by American, United, and Delta to set prices for flights, I imagine many would see this as an anti-trust violation.
Big data is powerful. It can help give an organization an advantage over its competition. This is one reason lots of companies hire data professionals like us; they see data as a very valuable asset. However, in this case, I feel that one company selling this data, or rather the conclusions, to competitors is a problem.
I expect more problems like this in the future as smart people look to harness the power of data and sell their services to competitive companies in many industries.
Steve Jones
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