Thursday, May 21, 2015

WOW Uber

WSJ is reporting that Uber is in talks for a $1 billion credit facility from investment banks.

About six to seven banks are expected to be part of the facility.

Notes WSJ:
Negotiating a credit line is a move that often signals the early stages of preparation for an initial public offering as it helps cement relationships with banks, though the two capital raisings aren’t necessarily linked. An IPO isn’t imminent, however, people familiar with the talks said. One person said a debut wasn’t expected until next year at the earliest...Other technology companies to reach similar milestones, Facebook Inc. and Alibaba Group Holding Ltd., also sought large credit facilities before their IPOs.
My fearless forecast :If the Fed is still printing money aggressively when Uber does decide to go public. it will be the hottest IPO ever.



  1. Can Algorithms Form Price-Fixing Cartels?

    “We will not tolerate anticompetitive conduct, whether it occurs in a smoke-filled room or over the Internet using complex pricing algorithms,” Assistant Attorney General Bill Baer, of the department’s antitrust division, said. “American consumers have the right to a free and fair marketplace online, as well as in brick and mortar businesses.”

    Casual observers might wonder why, for its first Sherman Act antitrust case against an online-sales executive, the Department of Justice targeted a relatively small-time retailer in the wall-d├ęcor industry. After all, Silicon Valley is no doubt replete with e-commerce executives who have colluded to bend rules and harm consumers. And the department’s case rested on allegations of fairly standard price-fixing behavior: according to prosecutors, Topkins and his co-conspirators, who were unnamed in the complaint, collected, exchanged, monitored, and discussed how much to charge for posters that were sold, distributed, and paid for on Amazon’s auction site from California to other states. Coupled with the details of the complaint, however, Baer’s statement suggests that prosecutors might have been interested in a tool underlying Topkins’s apparent misdeeds: an algorithm he had coded to instruct his company’s software to set prices.

    “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal,” it states. Since the Sherman Act was bolstered, in 1914, with the passage of the Clayton Act, the country’s antitrust apparatus has allowed the federal government to go after all kinds of businesses, and has typically encompassed new industries as they have emerged. Algorithm-driven (or bot-driven) selling, however, poses a new and formidable challenge to existing antitrust laws. If the practice hasn’t yet become a full-blown conundrum for prosecutors and regulators, the Topkins case suggests that it soon might. In capturing a plea, the Department of Justice was apparently able to rely on evidence of a “meeting of the minds” among co-conspirators. Topkins’s algorithm wasn’t an impediment to prosecution, because the seller had otherwise demonstrated a will to collude with other parties and then coded the algorithm to carry out the agreement. But often there is no evidence of a prior agreement when computers are in play, which means that antitrust prosecutions involving algorithms could be harder to prove in the future.

    “We are not setting the price. The market is setting the price. We have algorithms to determine what that market is,” he said.

    Ezrachi and Stucke suggest other ways in which algorithms can behave as cartels. One of these would involve “predictable agents,” which are designed to deliver predictable outcomes in response to market conditions. According to Ezrachi and Stucke, these agents, when adopted by multiple actors, “more easily reach a tacit agreement, detect breaches and punish deviations.” The result is a “conscious parallelism” that leads to higher prices. The pair also identify the potential for price-fixing by “smart machines,” which are programmed to achieve an outcome that they pursue via self-learning and experimentation. Evidence of intent would be difficult to establish in both types of cases, especially ones involving smart machines.

    1. This article never explains HOW the bots were fixing prices. It looks like price discovery to me.

  2. Yeah, so price discovery is a crime. BTW, non-government long term monopolies are impossible to maintain in a free market, yes?

    1. price fixing is a a free market, if the biggest market ie rates which everything is priced off of is controlled?

    2. that's a THEORETICAL free market, Tom. The real free market, of course, is down on the street corner.