The Federal Trade Commission (FTC) and the Department of Justice’s (DOJ) Antitrust Division have taken a significant step by filing a “statement of interest” in a notable lawsuit involving hotel room price collusion. This action underscores the government’s stance against the use of algorithms by hotels to set room rates in a manner that violates antitrust laws. The case, Cornish-Adebivi v. Ceasar’s Entertainment, currently proceeding in the District of New Jersey, has drawn attention due to its implications for pricing practices across the hospitality industry.
According to an FTC press release, the federal agencies have raised concerns over hotels colluding on room pricing, emphasizing that the use of algorithms for such purposes is illegal if it results in practices that would otherwise be prohibited. The increasing reliance on algorithms by various industries for price determination poses significant challenges, particularly when it comes to ensuring competitive pricing for consumers.
The FTC highlighted the potential for a small number of algorithm providers to influence market segments significantly, facilitating collusion among competitors. This is particularly troubling in markets that have become more concentrated, making it increasingly difficult for consumers to find competitive rates and comparison-shop effectively.
The statement of interest from the FTC and DOJ clarifies the government’s viewpoint that hotels utilizing algorithms to coordinate room pricing are engaging in activities that contravene antitrust regulations. This intervention supports the plaintiffs in their class action lawsuit against Caesars Entertainment and other hotel operators, accusing them of participating in an unlawful price-fixing conspiracy through the use of a shared pricing algorithm.
The plaintiffs, a group of New Jersey residents, aim to demonstrate that the involved hotels’ actions constitute a “conspiracy in restraint of trade,” violating Section 1 of the Sherman Act. This case not only seeks to address alleged illegal pricing strategies but also sets a precedent for how antitrust laws apply to algorithmic pricing methods in the hospitality sector and beyond.
