On May 8, a Nevada federal court dismissed with prejudice a class action complaint alleging that several Las Vegas hotel operators violated Section 1 of the Sherman Act by agreeing to set hotel room prices using pricing algorithms from the same vendor.  The decision, Gibson v. Cendyn Group, No. 2:23-cv-00140 (D. Nev. 2024), follows the court’s October 24, 2023, dismissal of plaintiffs’ original complaint, which rejected plaintiffs’ allegations of a per se unlawful price-fixing conspiracy but granted leave to amend based on a Rule of Reason theory. 

In its May 8 decision, the court found that plaintiffs failed to cure several key defects identified in the court’s initial dismissal order, which is summarized in this linked post.  The court rejected plaintiffs’ allegations of parallel conduct because they had not pleaded that defendants adopted pricing algorithms at around the same time, or that defendants “delegated their decisionmaking on price” to algorithmic pricing software.  The amended complaint also failed to show that defendants exchanged competitively sensitive, nonpublic information using algorithmic pricing software, and the court reiterated that “consulting public sources to determine how to price your product” does “not suggest collusion.”    

The court also rejected plaintiffs’ new theory that they “need not allege the exchange of non-public information” so long as the algorithmic pricing software was trained using machine learning on defendants’ nonpublic information.  Analogizing the algorithms to an attorney who improved her skills over time with access to confidential client information, the court reasoned that plaintiffs had only alleged that the software used nonpublic information to improve its pricing recommendations over time.  But that allegation did not “plausibly suggest” that the algorithms actually exchanged nonpublic information amongst defendants, much less that defendants had collectively agreed to adopt pricing recommendations that were based on that confidential information. 

Finally, the court rejected plaintiffs’ Rule of Reason claim for similar defects as doomed their per se claim:  Plaintiffs could not plead that defendants’ vertical agreements with the software vendor unreasonably restrained trade because these agreements did not require defendants to accept the vendor’s algorithmically recommended prices.  To the contrary, the court noted, defendants often rejected the vendor’s algorithmic price recommendations. 

The court’s dismissal with prejudice marks the first case that has reached a final decision among several cases across various industries alleging algorithmic price fixing in the past couple years.  We are closely monitoring these and other antitrust and algorithmic pricing developments as they unfold.  A summary of the court’s October 2023 order in Gibson v. MGM Resorts International is available here, and a summary of Statements of Interest filed by the United States in two other ongoing algorithmic pricing cases is available here.