Algorithms can be tool in price-fixing: DOJ, FTC

(NewsNation) — “Price fixing by algorithm is still price fixing.” That’s the bottom line (actually, the headline) from the Federal Trade Commission concerning some Atlantic City casino hotels accused of using their apps to collude on room rates.

“Hotels cannot collude on room pricing and cannot use an algorithm to engage in practices that would be illegal if done by a real person,” the Commission said in a statement.

The lawsuit, filed in federal court in New Jersey, claims the hotels engaged in a price-fixing scheme thanks to a shared pricing algorithm solution called Rainmaker, which maintained uniform, inflated prices at the properties along the famous Boardwalk.

The hotels say they have not violated the Sherman Act, which bans collusion on prices, because there was no direct communication between the competitors. They also say the algorithm only provides recommendations and doesn’t actually set room rates.

The DOJ and FTC disagree, saying as long as there’s a shared understanding among the companies to use Rainmaker, their collective actions can be considered collusion.

The Atlantic City case is not unique. An antitrust class action suit in Washington State accuses major hotel chains of using a common research company to fix rates.

A similar suit filed in northern Illinois contends that several international hotel groups gained insights into competitors’ pricing, including data projecting as much as a year in advance.

“Hotel Defendants no longer need to cut prices to fill rooms but can increase (and maintain) artificially inflated rates based on otherwise proprietary information about competitors’ room supply,” the lawsuit claims.

The hotels have at least one ruling in their favor: A proposed class action suit accusing MGM Resorts, Caesars Entertainment and other hotel operators in Las Vegas of conspiring to overcharge room rates was dismissed.

And the issue is not just about hotel rooms. The DOJ and FTC have filed statements of interest in cases involving alleged price-fixing by algorithm in the apartment, real estate and food industries.


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