The federal government has weighed in on a lawsuit filed by tourists claiming alleged price-fixing by Atlantic City casinos.
The Federal Trade Commission and the Antitrust Division of the Department of Justice filed a Statement of Interest, essentially joining the plaintiff side of the case that could lead to financial penalties for the likes of Caesars Entertainment, Hard Rock International and MGM Resorts International, all named as co-defendants in the lawsuit.
The suit claims that casinos in Atlantic City operated by the defendants have used algorithms to unfairly collude on the pricing of rooms.
The joint statement from the FTC and DOJ contends that, even if the companies never communicated about it, using the algorithm can still violate antitrust law. In addition, those companies can also violate US law by using the algorithm to set a starting price for rooms even if those prices vary by property.
Reviewing alleged price-fixing lawsuit against Atlantic City casinos
Caesars owns and operates three Atlantic City resorts with gaming venues: Caesars Atlantic City, Harrah’s Atlantic City and Tropicana Atlantic City. Meanwhile, MGM runs Borgata Atlantic City, and, of course, Hard Rock owns Hard Rock Atlantic City.
According to the filing from three separate lawsuits that were wrapped into one by a federal judge earlier this year, MGM Resorts, Caesars and Hard Rock have utilized the same booking software to conspire to inflate the consumer rates of their hotel rooms. A booking technology provider named Cendyn Group is also being sued for damages.
The plaintiffs in the case claim that “tens if not hundreds of thousands” of consumers could potentially seek damages as a result of the unfair pricing practices by the three companies at their casinos in New Jersey. A similar lawsuit is pending in Nevada.
The class action lawsuit filed in the US District Court of New Jersey claims the pricing computed by the Cendyn software for the Atlantic City resorts led to “supra-competitive prices” for visitors.
What the federal government had to say regarding antitrust law
The Federal Trade Commission and US Department of Justice issued a joint statement that argues the companies may have broken antitrust laws.
The feds have recently pursued anti-competitive pricing in the residential housing market, where it cited the illegal use of price-monitoring software and algorithms that inflate praises to benefit the seller.
According to the joint statement, the defendants – aka Caesars, MGM and Hard Rock – need not to have directly communicated to have acted in collusion. They could still have violated federal law if they used an algorithm jointly to set a starting price for hotel rooms or packages at their resorts.
The FTC and the DOJ pointed to a pair of key aspects of competition law to illustrate that point.
“Competitors cannot lawfully cooperate to set their prices, whether via their staff or an algorithm, even if the competitors never communicate with each other directly.”
The second factor surrounds an agreement to use shared pricing recommendations, list prices or pricing algorithms, which would be unlawful.
“Setting or recommending initial starting prices can still violate the antitrust laws even if those are not the prices that consumers ultimately pay.”
