Justice Department Seeks to Redefine Antitrust Rules for Algorithm-Driven Pricing

The U.S. Department of Justice (DOJ) is advocating for a novel legal interpretation that would deem the use of price-setting algorithms among competitors as potentially illegal, regardless of whether these suggested prices are directly implemented. According to Bloomberg, the DOJ’s stance centers on treating these algorithms as a mechanism for unlawful coordination, highlighting the case of Las Vegas hotels accused of using shared software to align room prices.

Last week, the DOJ submitted an amicus brief to the U.S. Court of Appeals for the Ninth Circuit, supporting consumer plaintiffs who allege that major Las Vegas hotel chains, including Caesars Entertainment Inc., employed algorithms to set hotel room rates in a way that suppressed competition. The plaintiffs aim to overturn a federal district court ruling that dismissed the case on grounds that the hotel companies had not demonstrated explicit collusion.

The Ninth Circuit’s decision will be the first appellate court ruling on whether algorithmic recommendations alone could constitute price-fixing under antitrust law, even if companies do not uniformly adopt these recommendations. Per Bloomberg, the appellate court’s deliberations could set a precedent, examining whether competitive harm arises from shared algorithm use even if the companies involved used the software at different times or ultimately chose different pricing from the suggested rates.

Kathleen Bradish, the vice president and director of legal advocacy for the American Antitrust Institute, which filed a supporting brief for the plaintiffs, stated, “This is an opportunity for the DOJ to assert its position on the evolving role of algorithms in competition law.” Bradish noted that judges are now facing the challenge of bridging traditional antitrust principles with complex, technology-driven pricing systems that enable real-time information-sharing across competing entities.

Read more: DOJ Backs Plaintiffs in Vegas Hotel Price-Fixing Case Over Algorithmic Pricing

Parallel cases in other jurisdictions could amplify the DOJ’s approach. According to Bloomberg, a similar case involving Atlantic City hotel-casinos was recently dismissed, but the DOJ has already appealed to the Third Circuit. Additionally, the DOJ filed a brief in a case against Yardi Systems Inc., a property management software provider accused of coordinating rental rate increases among multifamily property owners.

Mary Kaiser, an antitrust expert and partner at Goodwin Procter LLP, indicated that the DOJ is pushing courts to rethink their perspective on algorithmic tools, viewing them as “powerful, transformative technologies that enable competitors to share pricing intentions in unprecedented ways.” This reimagining of the algorithms’ role, Kaiser explained, could represent a “technical shift” in DOJ’s interpretation of competitive practices.

District courts in the Las Vegas and Atlantic City cases had previously ruled that the plaintiffs failed to establish collusion, in part because hotels used the software provider Cendyn’s recommendations selectively and were not bound by the algorithm’s output. But the DOJ’s amicus brief underscores a different interpretation, asserting that price-fixing could be present if competitors agree merely on “starting points” generated by a common algorithm.

The DOJ’s brief further contends that the marketing materials of certain algorithm providers may act as “invitations to collude.” The DOJ argues that promotional content suggests that using the algorithmic pricing service will reduce competition by signaling that competitors using the same software can achieve similar, profit-maximizing rates.

The Las Vegas plaintiffs are represented by the law firm Hagens Berman Sobol Shapiro LLP, while several prominent law firms, including Skadden, Arps, Slate, Meagher & Flom LLP, Kirkland & Ellis LLP, and Latham & Watkins LLP, are defending the hotel companies and Cendyn.

The outcome of Gibson v. Cendyn Group, Inc., case No. 24-3576, could set a critical legal precedent on the reach of antitrust law in the era of algorithm-driven pricing.

Source: Bloomberg