Most Important Antitrust Decision Since the Proliferation of Algorithm Software

On May 8, Chief Judge Miranda Du of the Federal District Court, District of Nevada, granted the defendant’s motion to dismiss, with prejudice, in Gibson v. MGM Resorts International. In a client alert, the Brownstein firm calls it one of the most important antitrust decisions “since the proliferation of algorithm software.”

The plaintiffs represented a class of guests at various hotels on the Las Vegas Strip. They alleged that the defendants and a software company, Cendyn Group, violated Section 1 of the Sherman Antitrust Act by fixing prices. The allegation was that Cendyn’s software provides the hotel defendants two pricing recommendations, GuestRev and GroupRev, using a feature called RevCaster, which in turn uses a “rate shopper product” algorithm for collecting public rate information.

Judge Du identified several deficiencies in the plaintiffs’ amended complaint that undermined their allegation of a tacit agreement, and ultimately their case. These included: a finding that the adoption of the software by each defendant was spread out over 10 years, which argues against collusion; and a finding that the inference of exchanging nonpublic information through machine learning techniques is insufficient. 

Brownstein calls the latter a critical point, in light of allegations in other antitrust cases that the algorithm facilitated the exchange of non-public information, and says the opinion will be a touchstone in advising clients on the use of algorithms to gather pricing information. According to the ruling: “Consulting your competitors’ public rates to determine how to price your hotel room—without more—does not violate the Sherman Act.”

The opinion did disagree with the defendant’s argument that in order to allege a claim, plaintiffs must assert that all defendants used the same algorithm, in the same way, by selecting the same inputs. The opinion called that an overstatement of a plaintiff’s burden.