Hotel Price-Fixing Class Action Lawsuit Targets Major Chains

Operators of some of the country’s largest hotels are being accused of conspiring together to jack up room rates in a scheme akin to if “they secretly met in a back room and exchanged their information and agreed to a supra-competitive price,” a new class action lawsuit alleges.

The price-fixing lawsuit calls the scheme, in which the hotel chains allegedly all use the same software to share sensitive information in real time to make sure they keep prices as high as possible, “an old-fashioned horizontal conspiracy between competitors.”

Travelers Overcharged? Class Action Accuses Hotels of Price Gouging

A group of hotel-goers Hanson Dai, Max Chiswick, Adolph Robles, Steven Stack, Matthew Gilbert, Michael Molinaro, Tony Qian, and Mark Lester filed the proposed class action lawsuit against Hilton, Four Seasons, Choice, Wyndham, Omni, Hyatt, and SAS Institute Inc. and its subsidiary IDeaS Inc., accusing the group of Sherman Act violations.

North Carolina based SAS Institute Inc. and IDeaS Inc. developed the revenue management system (RMS) through which the hotels “fixed prices through a shared pricing algorithm.” 

The group of plaintiffs accuse the hotels of having harmed competition and, in turn, consumers such as themselves by using the RMS. 

“By agreeing to use a shared algorithm to set prices, [the hotels] have replaced independent decision making by marketplace competitors with cooperative price-fixing, thereby eliminating or severely impairing market competition,” the lawsuit alleges. 

They go on to say that by artificially inflating hotel room rates they’ve overcharged hotel-goers and caused “economic harm and antitrust injury.”

How Hotels Allegedly Conspired to Fix Prices

The group accuses the hotels of giving IDeaS “a continuous stream of non-public, competitively sensitive price and occupancy information in real time or near real time,” with the knowledge that their competitors are doing the same thing. 

“This includes non-public information such as the price paid by consumers for each room, the quantity of rooms available by room type, whether any consumers attempted to book a room that was no longer available, and room rates not available to the public.”

IDeaS then inputs the information into its RMS algorithm and generates “supra-competitive pricing recommendations” for each hotel operator, which the lawsuit alleges the hotel operators adopt “in every instance.” 

Government Cracks Down on Anti-Competitive Practices

Algorithmic price fixing allegations aren’t just plaguing the hotel market, and they are catching the eye of the federal government. These algorithms analyze market data, competitor prices, and other factors to automatically adjust prices in real-time, and, in some situations, can lead to uniformly higher prices. 

The Federal Trade Commission joined the Justice Department’s Antitrust Division in filing a statement of interest in one such case in New Jersey, where Caesars Entertainment was accused of price fixing. The statement says hotels cannot collude on room pricing and cannot use an algorithm to engage in practices that would be illegal if done by a real person.

“Companies across the economy are increasingly using algorithms to determine their prices. When a small group of algorithm providers can influence a major segment of a market, competitors are better able to use the algorithm provider to facilitate collusion,” the FTC writes. 

The FTC and Justice Department also filed a statement of interest in an algorithmic price-fixing case in the residential housing market, and the Justice Department’s Antitrust Division filed a statement of interest and memorandum of law in another real estate algorithmic price-fixing case last year, the FTC reports. 

Meanwhile, Reuters reported that a judge recently threw out a similar proposed class action lawsuit, which accused a group of Las Vegas hotels of jacking up prices by using software for price fixing. Chief U.S. District Judge Miranda Du said the plaintiffs hadn’t shown proof that the hotels made an agreement with each other to fix prices. 

In a separate case filed in May, six hotel chains in California were accused in a class action lawsuit of manipulating room prices through AI-powered software. The lawsuit, filed in San Francisco federal court, alleges that Hilton, Wyndham, Four Seasons, Omni Hotels and Resorts, Hyatt, and Choice Hotels International colluded to fix prices based on the software's pricing recommendations, thereby violating antitrust laws.

In this latest hotel price-fixing class action lawsuit, Dai and the other plaintiffs want to represent hotel-goers from across the country and they are calling for injunctive relief, statutory treble damages, compensatory damages, and punitive damages.

Case Details:

• Lawsuit: Dai et al. v. SaS Institute Inc. et al.
• Case Number:  3:24-cv-02537-TSH 
• Court: U.S. District Court for the Northern District of California

Plaintiffs' Attorneys:

• Daniel J. Mogin, Timothy Z. LaComb, and Jonathan L. Rubin (MoginRubin LLP)
• Joseph R. Saveri, Cardio Zirpoli, Christopher K. L. Young, and Kevin E. Rayhill (Joseph Saveri Law Firm, LLP)
• Don Bivens (Don Bivens PLLC)