In yet another attempt to stretch antitrust law into new territory, the Federal Trade Commission (FTC) and Department of Justice (DOJ) released a joint statement of interest related to whether algorithmic pricing is a form of collusion by hotels. However, this joint statement relies on questionable legal arguments to sidestep the fact that the collusion requires proof of communication between the accused parties. Algorithmic pricing could benefit consumers and shouldn’t be treated as inherently suspect.  

In Altman et al v. Caesars Entertainment, et al., the prosecution accused several hotels in the Atlantic City area of collusion through the use of Rainmaker software, which increases hotel revenue by automating pricing. They argued that when multiple hotels began using Rainmaker, they essentially participated in collusion to keep prices high for patrons.

In a similar case in Las Vegas, the judge dismissed a lawsuit due to a lack of evidence of collusion. The ruling found that the plaintiffs had not sufficiently proven that there was any communication indicating an agreement to collude or to use the same software. Such proof is necessary to substantiate a violation of the Sherman Antitrust Act.

The FTC and DOJ weighed in arguing that collusion can still occur even if no one involved communicated with one another, claiming that using the same pricing algorithm can lead to collusion. Specifically, they cite cases of tacit collusion where there was not an agreement but rather parallel conduct (adopting the same pricing strategies) between companies that indicated collusion.

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Trey Price is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.