Las Vegas Hotel Price-Fixing Lawsuit: Guests Appeal Dismissal

Case Overview: A class action lawsuit was filed against major Las Vegas hotels, alleging that they used an algorithm to fix hotel room prices. The lawsuit was initially dismissed, but the plaintiffs have appealed the decision.

Consumers Affected: Guests who stayed at Las Vegas hotels.

Court: U.S. District Court for the Northern District of Nevada (original case); 9th U.S. Circuit Court of Appeals (appeal)

A group of consumers suing major Las Vegas resorts over alleged price-fixing has asked a U.S. appeals court to give their lawsuit a second chance. They’re challenging a decision by a Nevada federal judge, who dismissed their claims that hotels colluded to inflate room prices using shared software. 

The plaintiffs, arguing the case before the 9th U.S. Circuit Court of Appeals, say this lawsuit is a key test for claims involving companies using computer algorithms to make pricing decisions, Reuters reports.

Lawsuit Claims Las Vegas Hotels Used Software to Fix Prices

The class action lawsuit, filed by Richard Gibson and Heriberto Vaniente, claimed that big names like Wynn Resorts, Caesars Entertainment, MGM Resorts, and Treasure Island teamed up with a software company, Rainmaker Group, to drive up hotel room rates on the Las Vegas Strip. Rainmaker’s pricing algorithm allegedly helped the hotels share internal data and set room rates artificially high.

The plaintiffs said this kind of coordination, even if it's not a direct agreement, amounts to price-fixing. They argue in the lawsuit that algorithms allow companies to collude without needing face-to-face meetings, making it easier to keep prices elevated and less competitive.

Judge Dismisses Lawsuit Citing Lack of Evidence, Plaintiffs Appeal

In May, Chief U.S. District Judge Miranda Du dismissed the lawsuit, saying the plaintiffs hadn’t proven that the hotels made a formal agreement to fix prices. Du pointed out that Rainmaker’s platform offered pricing suggestions, but the hotels were not required to follow them. Without clear evidence that the hotels agreed to restrict competition, the judge said there wasn’t enough to move forward with the case.

The plaintiffs are now asking the appeals court to take another look, arguing that non-binding pricing recommendations can still harm competition, which they allege is enough to violate antitrust laws.

Hotel Price-Fixing Lawsuits on the Rise Across the US

This Las Vegas lawsuit isn’t the only one accusing hotels of price-fixing. A similar case was recently filed against other major hotel chains, including Hilton, Hyatt, and Wyndham, accusing them of using another pricing algorithm, G3 RMS, to coordinate room rates and inflate prices for extended stay guests.

The plaintiffs in that case argue that these algorithms allow hotels to secretly share real-time pricing data, ensuring rates stay high across the board. According to the lawsuit, this is no different from if hotel operators met in a back room and agreed to keep prices at a certain level, in violation of the Sherman Antitrust Act. 

Hotels in Atlantic City including Caesars Entertainment Inc and MGM Resorts International have also been hit by legal action from consumers over similar allegations.

Price-Fixing Allegations Target Companies in Various Industries

Price-fixing claims aren’t just targeting the hotel industry. Across several sectors, companies are facing similar allegations. In academia, a UCLA neuroscientist is suing major publishers, claiming they colluded to inflate prices for peer-reviewed journals. The tech world has also seen its share of price-fixing lawsuits, including one against Valve Corporation for allegedly using its Steam platform to keep video game prices high.

Ticketmaster and Live Nation have been hit with a lawsuit accusing them of using their market power to overcharge for concert tickets. Meanwhile, a recent antitrust lawsuit involving college financial aid has led to a $284 million settlement with elite U.S. schools.

This trend is raising red flags not just for consumers, but for regulators as well. The U.S. Department of Justice and the Federal Trade Commission seem to be concerned about how algorithms are being used to allegedly facilitate price-fixing across industries, including the hotel sector.

The agencies have already filed statements of interest in several cases. The DOJ is also looking into algorithmic price-fixing in other markets, such as online travel platforms, where companies like Expedia and Booking.com have also been accused of using algorithms to keep rates high. 

Case Details

• Lawsuit: Gibson, et al. v. Cendyn Group et al.
• Case Number: 24-3576
• Court: 9th U.S. Circuit Court of Appeals

Have you noticed unusually high prices when booking hotel rooms in Las Vegas or elsewhere? Share your experiences and thoughts in the comments below.