The Federal Trade Commission and the Justice Department’s Antitrust Division have submitted a hotel price fixing statement to the District of New Jersey. It was filed in the ongoing case of Cornish-Adebiyi v. Caesars Entertainment, as announced earlier this month. This case revolves around the utilization of pricing algorithms by casino hotels, a practice that is increasingly drawing regulatory attention.
In their statement, the agencies address hotel price fixing, and clarify that hotels cannot collaborate on setting room prices or employ algorithms to carry out actions that would be considered illegal if performed by individuals. The spotlight has been on price-setting algorithms as more hotels adopt technology to assist in pricing decisions. However, recent legal actions suggest that some of these platforms may be involved in illicit price-fixing activities.
According to the Sherman Act, it is prohibited for competitors to collectively manipulate prices by pooling their independent decision-making abilities to increase, decrease, fix, peg, or stabilize prices, as stated by the FTC and the DOJ in their joint statement. The plaintiffs in Cornish-Adebiyi v. Caesars Entertainment claim that competing casino hotels are violating the Sherman Act by utilizing the Rainmaker platform to algorithmically determine prices.
Previously, the defendant hotels in the case sought its dismissal, arguing that plaintiffs failed to demonstrate direct communications between the hotels, and the recommendations made by Rainmaker were non-binding. However, the FTC and DOJ argue that neither of these defenses is tenable, as the law encompasses hotel price fixing, in both implicit and explicit agreements.