Posted on: October 2, 2024, 12:31h.
Last updated on: October 2, 2024, 12:41h.
Las Vegas and Atlantic City casino hotels continue to defend how they price their hotel rooms amid two proposed class-action lawsuits alleging that resorts have conspired to overcharge consumers.
To date, federal courts have ruled against plaintiffs’ claims that by sharing sensitive information such as real-time occupancy data with a third party, which then disseminates that information back to hotels with recommended room rates, participating resorts are engaging in price-fixing. Federal antitrust laws, specifically the Sherman Act, prohibit companies from conspiring to monopolize or attempting to monopolize a market for products and/or services like hotel rooms.
In dismissing an appeal of Atlantic City casinos allegedly participating in price gouging, New Jersey US District Court Judge Karen Williams said the lawsuit lacked evidence to prove such claims. Williams dismissed the lawsuit with prejudice, meaning it cannot be filed or appealed again.
Case Remains in Nevada
In May, a federal district court judge in Nevada dismissed a similarly proposed class-action lawsuit alleging that several casinos on the Las Vegas Strip engaged in price-fixing. Nevada’s US District Chief Judge Miranda Du dismissed the case but without prejudice, which allowed the plaintiffs to this week appeal the matter to the 9th US Circuit Court of Appeals.
With Williams’ ruling, the odds of the federal appellate court in San Francisco accepting the challenge presumably lengthen. In both cases, attorneys for the proposed classes argued that by utilizing the third-party Cendyn, a hotel software provider, casinos are duping customers into paying more for a room.
Cendyn’s “Rainmaker” software continuously accesses a partnered casino hotel’s occupancy data and certain nonpublic proprietary data. The software then “processes and analyzes” the data inputs for that individual hotel. The service then uses an algorithm with “other supply and demand data” from competing hotels to recommend an “optimal” rate for the casino hotel’s rooms.
The casino may adopt or reject Rainmaker’s recommended rate. The complaints argue that casinos adopt the software’s recommended rate about 90% of the time.
In the Nevada case, the named defendants include MGM Resorts, Caesars Entertainment, Wynn Resorts, Treasure Island, and Blackstone Group. In the New Jersey litigation, the named defendants included Caesars, Hard Rock, and Borgata.
Judge’s Explanation for Dismissal
Williams said she dismissed the Atlantic City casino hotel room price-fixing case because it lacked evidence of a conspiracy among the named defendants.
“The unlawful agreement alleged in this case is that of a hub-and-spoke conspiracy — a type of conspiratorial agreement comprised of a central actor (the ‘hub’) with multiple competitors jetting out vertically therefrom (the ‘spokes’),” Williams explained.
In all hub-and-spoke conspiracies, the horizontal agreement among the spokes supports the agreements between the hub and each spoke, and vice versa. Thus, the ‘critical issue’ for establishing a hub-and-spoke conspiracy is determining ‘how the spokes are connected to each other,’” Williams continued.
Williams said the plaintiffs needed to present “enough factual matter to suggest that an agreement was made,” something she said the evidence lacked.
“Plaintiffs have offered no allegation that directly evinces an explicit price-fixing agreement, and they thus endeavor to infer a tacit agreement through the Casino-Hotels’ parallel conduct, namely their ‘knowing use of the same Rainmaker software,’” Williams concluded.
