Attack of the shopbots Analysis/Commentary "We have met the enemy, and he is a shopbot," eBay, the online auction house, seemed to be saying, following its court case against Biddersedge.com. Bidder's Edge was doing little more than sending out a search engine to gather eBay's bids and displaying the bids together with others on its site, but that was enough for eBay to cry foul. After all, eBay was the big boy on the market, and the shopbot threatened its dominion. Economists dream of a perfect recreation of classic economics, where the wishes of sellers meet the wants of consumers as if guided, according to Adam Smith (Wealth of Nations, 1776), by an "invisible hand." But Smith never conceived a market dominated by entities as big as eBay, nor that the invisible hand of market justice would be driven by courts (or the FTC). This seems to have happened. The threat of automated agents (shopping robots or "shopbots") calls into question the value of consumer loyalty and market freedom. All things being equal, a shopbot could cull eBay's prices with impunity, and all things being equal, eBay could resist by exercising its freedom to monitor and adjust its prices to the market. But all things are not equal, since eBay has infrastructure costs, marketing costs, and a commitment to randomizing its price structure that the small players -- who benefit from a shopbot's incursions -- do not encounter. The problem is complex. Big business has enjoyed for years a tendency toward "oligarchy" (the rule of the powerful and wealthy) that smaller players do not enjoy. A small business must grow at an extraordinary rate to enjoy the right to compete with its big business competitor. At the same time, big companies must engage in constant "regrowth" to fend off entrants. The government plays occasional arbiter in this game of invention and reinvention, and challenge of champions and upstarts. Into the disequilibrium that ensues, technology stands to give false advantages to one or to the other: if big business's mode of reinvention borders on collusion, government can step in; if new businesses trample the inherent rights of incumbents to reinvent themselves, they enjoy unjust enrichment. This, then, is the dilemma facing the Net's new invaders, the automated agents that trample the lines between spheres of influence and growth. Shopbots that seek to cull the promotions of incumbent merchants encourage an economy of thrift at the expense of an economy of quality and profit. For, in effect, high prices do encourage greater spending on product quality, and bargain hunting as a vocation does seem to undermine the brand loyalty that guarantees the reinvention of big business. Some shopbot operators understand this paradox of pricing, realizing that price competition should mostly occur between businesses armed to compete with one another: discount sellers against discount sellers, midrange against midrange, and upscale merchants against upscale merchants. This leaves the door open to collusion among the oligarchies, but it also leaves government a clear path to corrective action -- something the clash between eBay and Bidder's Edge didn't allow to happen. Most likely, with refinements in agent technology, we will better understand the ethical lines between growth and unfair competition, reinvention and creative inflation. October 4, 2000