Ninth Circuit Rejects Antitrust Claims Against Las Vegas Hotels

The Ninth Circuit Court of Appeals recently affirmed the dismissal of a class action with antitrust claims in Gibson v. Cendyn Group, addressing allegations that Las Vegas hotels violated Section 1 of the Sherman Act.

According to a Covington blog, the ruling represents the first appellate decision addressing antitrust liability tied to algorithmic pricing software.

The dispute concerned plaintiffs’ allegations that a network of hotels conspired, either directly or through software licensing agreements, to raise room rates. They argued that the hotels’ use of the same revenue management software artificially inflated room prices.

The court found that the claims failed to establish a legal restraint on competition.

Initially, plaintiffs asserted both a horizontal price-fixing theory and a vertical restraint theory involving individual licensing agreements with the software vendor.

Previous federal court orders dismissed the horizontal conspiracy claim and rejected the vertical restraint theory under the Rule of Reason.

On appeal, plaintiffs abandoned the horizontal claim and focused solely on the argument that licensing agreements led to aggregate price increases in the market for Las Vegas hotel rooms.

The Ninth Circuit disagreed with the antitrust claims, ruling that the software licenses were ordinary sales contracts rather than vertical restraints that affected market competition. The court reasoned that common use of revenue management software did not limit hotels’ independent incentives to set profit-maximizing prices.

Additionally, it ruled that the licenses did not constrain the hotels’ pricing decisions or their ability to compete, because the agreements only governed access to software products, not hotel room rates.

Without evidence of a horizontal conspiracy or enforceable vertical restrictions, the court concluded that the licensing arrangements did not constitute antitrust violations.

The Ninth Circuit’s decision signals that courts may be cautious about attributing market harm to algorithmic pricing absent clear collusion. It also provides guidance to businesses considering the use of common software tools. It establishes that competitive behavior facilitated by standard technology does not automatically trigger antitrust liability.