New Jersey Court Dismisses Software Price-Fixing Claims Against Atlantic City Casinos

On September 30, a New Jersey federal court dismissed with prejudice an antitrust class action complaint alleging that several Atlantic City hotel operators engaged in a per se illegal "hub-and-spoke" price-fixing conspiracy through their use of software algorithms to set room rental rates. Cornish-Adebiyi v. Caesars Entertainment, No. 1:23-CV-02536 (D.N.J.).

According to the court, class plaintiffs' allegations concerning Atlantic City hoteliers suffered from the "same factual deficiencies identified" by a Nevada federal court in Gibson v. Cendyn Group, No. 2:23-cv-00140 (D. Nev.), which rejected price-fixing allegations arising from Las Vegas hotels' use of the same software. The court concluded that, in both cases, plaintiffs failed to plausibly allege the existence of unlawful agreements between the hotels at the "rim" of the alleged "hub-and-spoke" price-fixing conspiracy for several reasons.

As an initial matter, class plaintiffs alleged no direct evidence of agreements among the hotels. Accordingly, they were required to allege that the hotels engaged in "parallel conduct" that was suggestive of an underlying agreement. But the court determined that plaintiffs' allegations of parallelism were lacking in two critical respects. First, although all defendants currently use the room pricing software at-issue, each hotel began using that software at different times over a fourteen-year period. Second, the court noted, the defendant hotels did not delegate pricing authority to the software and instead frequently rejected its suggestions. According to the court, these allegations of non-parallelism "make[] it quite implausible that [defendants] tacitly agreed to anything, much less to fix the prices of their hotel rooms."

Plaintiffs also failed to allege that defendants improperly exchanged confidential data through the room pricing software in service of an underlying price-fixing agreement. Although plaintiffs alleged that the hotels submitted their own non-public room pricing and occupancy data to the software vendor, they failed to allege that their "proprietary data are pooled or otherwise comingled" with competing hotels' data "into a common dataset against which the algorithm runs." Without further allegations that the software's pricing recommendations were "based on a pool of confidential competitor data," the court explained, each hotel's confidential data could have been used to generate price recommendations only for that hotel, inconsistent with the inference of "a plausible price-fixing agreement between the Casino-Hotels."

We previously summarized the decisions in Gibson v. Cendyn Grouphere and here.The Cornish-Adebiyi decision also follows the U.S. Department of Justice and Federal Trade Commission's joint Statements of Interest in the Atlantic City hotels case and two other so-called "algorithmic pricing" cases, previously covered here.