Court Dismisses Algorithmic Price-fixing Case, but Opens Door to Amended Complaint

• Publication year: 2024
• Citation: Vol. 7 No. 2

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Alexis J. Gilman, Jordan Ludwig, Jeane A. Thomas, and Darianne Young ^*

In this article, the authors discuss a recent federal district court decision that dismissed a class action complaint alleging that hotel operators violated antitrust laws by using pricing software to fix the prices of hotel rooms.

In an early test of antitrust claims based on alleged algorithmic price fixing, a federal judge has dismissed a class action complaint alleging that hotel operators conspired to unlawfully fix the prices of hotel rooms on the Las Vegas Strip using pricing software.

The judge in the U.S. District Court for the District of Nevada dismissed allegations that Las Vegas Strip hotel operators colluded to use pricing software to fix room rates, finding that the plaintiffs failed to plausibly allege that there was an agreement among the hotels to use the same pricing algorithm or even the same software product, which hotel operators were involved in the purported agreement, or that there was any confidential information exchanged via the software to support a "hub-and-spoke" conspiracy.

The court did, however, grant the plaintiffs leave to submit an amended complaint. Thus, the case, Gibson v. MGM Resorts, provides initial guideposts for how companies using pricing software might reduce potential antitrust risks.

Background

In a class action complaint, Cendyn Group and a group of hotel operators were accused of artificially inflating the price of hotel rooms on the Las Vegas Strip by colluding to use algorithmic pricing software offered by Rainmaker, a subsidiary of Cendyn. According to the complaint, Cendyn collected pricing and occupancy information from competing hotel operators, and its algorithmic pricing software then used this information to recommend prices to the

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hotel defendants. The plaintiffs alleged that these pricing algorithms allowed the hotels to...