ACM launches a study into the functioning of algorithms in practice

Today, the Netherlands Authority for Consumers and Markets (ACM) launched a trial in which it seeks to find out how it can monitor in practice the functioning of algorithms that businesses use. ACM wants to use this knowledge to let businesses know what they can expect when ACM checks their algorithms. ACM conducts this trial in collaboration with Muziekweb, the music library of the Netherlands.

Cateautje Hijmans van den Bergh, Member of the Board of ACM, adds: “Algorithms play an increasingly larger role in commercial practices of businesses. In order to ensure digital markets work well, it is important that we are able to determine how algorithms function in practice, and what consequences they have. That is why we launched this trial, where we can study the functioning of a concrete algorithm, and find out what ACM needs for its oversight activities.”

Oversight and algorithms

The use of algorithms can offer businesses many benefits, such as matching supply and demand better. However, there are also concerns, because, for example, businesses use algorithms to nudge online consumers in their choices and purchases, which are not always in the consumers’ best interests. In addition, doubts have been raised about whether there is sufficient knowledge of and oversight over the functioning and consequences of complex algorithms. In that context, ACM earlier this year published the Guidelines on the protection of the online consumer.

ACM can launch an investigation into the functioning of algorithms and the way in which businesses use these algorithms, if they play a role in violations of the rules that ACM enforces. This can occur, for example, if algorithms determine prices, influence supply and demand on the energy market, personalize offers, potentially lead to the creation of cartels, or nudge consumers towards a purchasing decision that is not in their best interest. For such investigations, ACM has at its disposal a team of 15 algorithm and data experts.

In such investigations, they look at, among other aspects:

• The algorithm’s role in the alleged violation;
• The purpose for which the algorithm is used;
• The basic principles that form the basis of the algorithm’s design and/or implementation;
• The input for and the results of the algorithm.

Trial with Muziekweb

Muziekweb uses algorithms to give visitors personalized music recommendations. In this trial, ACM looks at the reasons as to why the algorithm recommends rock music to one individual and jazz music to the other. ACM is not conducting an investigation into this company, but, in this trial, it is trying to identify what information it needs in order to be able to conduct an investigation into the functioning of algorithms. This knowledge is important for future investigations into violations committed by businesses that use algorithms.

Collaborations

The digital economy is one of the key priorities on ACM’s agenda. For the sectors that it oversees, ACM has described in a position paper what theoretical opportunities exist for monitoring the functioning of algorithms. The use of algorithms obviously also plays a role in other sectors and areas. That is why, in its oversight of algorithms, ACM explicitly seeks to collaborate with other stakeholders such as other regulators and inspectorates.

In a recent letter to the Dutch House of Representatives, the Dutch cabinet responded to three studies into the current and future risks and opportunities of algorithms. In these studies, references are made to the European Commission’s White Paper on AI (artificial intelligence). In the White Paper, it is emphasized that attention should also be given to consumer protection in the development of policies regarding AI.