Algorithmic Pricing Gets Boost in Ninth Cir. Hotel-Casino Ruling

A federal appeals court’s decision shutting down allegations that Las Vegas hotel-casinos colluded on room prices reduces legal risk for companies using algorithmic software for pricing decisions.

Even if the hotels were aware of their competitors’ use of Cendyn Group LLC’s pricing software, their individual decisions to use those products themselves were insufficient to support a federal antitrust claim, the US Court of Appeals for the Ninth Circuit held in a first-of-its-kind decision Aug. 15.

The ruling, which upheld a lower court’s dismissal of the case, is a significant win for Caesars Entertainment Inc., Wynn Resorts Ltd., and other hotel-casinos accused of using the software to inflate room prices on the Las Vegas Strip. The Ninth Circuit said there’s no conspiracy without an agreement.

The decision provides some “cover” for companies seeking to adopt AI for pricing, said Ken Racowski, an antitrust attorney at Holland & Knight LLP.

Companies in other industries including health care and housing are also increasingly using AI to develop products faster, improve business processes, and outperform competitors.

“If you are using pricing software and algorithms, as long as your confidential data is not being used to set pricing for a competitor and your pricing recommendations don’t include confidential data from one of your competitors, it feels like there’s a much lower risk,” Racowski said.

Companies aren’t completely free of risk but the ruling helps puts them on “solid ground” when defending against these types of claims, Racowski said.

“You can’t have an algorithmic collusion claim without proving the information exchange,” he said.

For plaintiffs, the ruling underscores that clear evidence of an agreement to restrain trade is required to succeed on such price-fixing allegations under Section 1 of the Sherman Act.

“If you don’t have a whistleblower or inside information about how software actually works, it’s going to be very difficult for you to plead one of these cases that survives a motion to dismiss,” Racowski said. “Just because a whole bunch of competitors get their information through a common software, it’s not enough to establish a Section 1 claim.”

‘Dangerous’ Implications

The ruling signals to companies they can engage in more overt price fixing via algorithm, which will hurt consumers and competitors, some antitrust attorneys warned.

RealPage, Yardi Systems and MultiPlan—now known as Claritev—are among the software companies accused by private plaintiffs of facilitating collusion through their AI price-setting tools.

Pricing algorithms have been scrutinized by federal regulators as well. Last year, the Justice Department—still under the Biden administration—filed an amicus brief in support of plaintiffs in the hotel-casino case, arguing the joint use of pricing algorithms by competitors presents dangers to the free market and can violate Section 1 of the Sherman Act.

The appellate decision “moves the needle in the direction of saying, ‘use computers, use algorithms, use AI,’ as it becomes ever more sophisticated to cause all the harms that the antitrust laws were designed to prevent,” said Joshua Davis, an attorney with plaintiff firm Berger Montague who supervises its San Francisco Bay Area office.

Not only will the ruling encourage companies to engage in anticompetitive behavior but it also puts “tremendous pressure on good actors” to engage in that conduct, he said.

“If you don’t, you may be driven out of business because you are trying to compete the right way,” Davis said.

The opinion suggests hotels can get around antitrust scrutiny as long as there is no evidence they communicated with each other, said Benjamin D. Brown, co-chair of Cohen Milstein’s antitrust practice.

“It’s potentially a step down a dangerous path of encouraging competing corporations to collude on price simply by choosing the same entity to outsource their pricing decisions,” Brown said. “It creates a very easy roadmap for price fixing.”

The plaintiffs are represented by firms including Hagens Berman Sobol Shapiro LLP. The hotels are represented by firms including Skadden, Arps, Slate, Meagher & Flom LLP and Kirkland & Ellis LLP. Cendyn is represented by Latham & Watkins.

The case is Gibson v. Cendyn Group LLC, 9th Cir., No. 24-3576, 8/15/25.