Las Vegas Hotel Price-Fixing Lawsuit Dismissed as Baseless

Article by : Erik Gibbs May 15, 2024

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A class-action lawsuit filed in January 2023, alleging hotel room price fixing on the Las Vegas Strip, has been dismissed by US District Chief Judge Miranda Du this past Wednesday.

The lawsuit, spearheaded by Seattle-based firm Hagens Berman Sobol Shapiro, targeted several prominent Strip hospitality companies, including Caesars Entertainment, Treasure Island, JC Hospitality, Blackstone Inc., Wynn Resorts Holdings, as well as Cendyn Group and its subsidiary Rainmaker Group Unlimited.

The lawsuit accused the hotel operators of violating the Sherman Antitrust Act by utilizing the Rainmaker software, developed by Cendyn. The software provides algorithms for daily hotel room pricing, demand forecasting, and rate shopping.

The plaintiffs argued that the widespread use of the Rainmaker software implied a covert agreement among the defendants to fix prices.

However, in October, Judge Du dismissed the suit, citing its failure to demonstrate that the hotel companies had conspired to set price points.

“The court, therefore, cannot say which pricing algorithms each hotel operator uses, making it impossible to infer that all hotel operators agreed to use the same ones,” Du had written in its previous court order.

Despite the plaintiffs being given the opportunity to refile an amended complaint, they were unable to convince the judge with their assertion of a plausible but unspoken agreement between the hotel operators.

The dismissal pointed out an important legal principle: hotels are under no obligation to adhere to the pricing recommendations generated by the Rainmaker software. This ruling clarifies that the use of such software does not in itself constitute evidence of price fixing.

Described as a “relatively novel antitrust theory premised on algorithmic pricing,” this case sheds light on the changing nature of antitrust law in the digital age. The intersection of technology and antitrust regulation presents new challenges and considerations for legal interpretation.

According to Las Vegas Convention and Visitors Authority statistics, during the first eight months of 2023, Las Vegas hotels maintained an average daily room rate of $178.11. In 2019, this average stood at $132.62.

Following the onset of the coronavirus pandemic, numerous Strip resorts implemented strategies to uphold elevated hotel rates, aiming to mitigate any perception of diminished quality.

Typically, they operated according to supply-and-demand principles, adjusting prices in response to major events such as the NFL draft, Electric Daisy Carnival, National Finals Rodeo, and CES.