Hotel guests say competing casino-hotels fed confidential pricing and occupancy data into the same system, then followed its room-rate recommendations. A federal appeals court ruled that the allegations are plausible enough to test in discovery.
Precedential rulingTL;DR
- Casino-hotel guests allege that Caesars Atlantic City, Harrah’s, Tropicana, Borgata and Hard Rock used Cendyn’s Rainmaker software as a shared pricing mechanism.
- According to the complaint, each casino-hotel continuously supplied current, non-public pricing and occupancy data that Rainmaker used to recommend room rates.
- The recommendations were allegedly uploaded directly into hotel systems and accepted about 90% of the time, although each property retained final pricing authority.
- The named guests claim they paid artificially high room prices during a proposed class period beginning no later than June 28, 2018. The available opinion does not quantify any guest’s alleged overcharge.
- A district court dismissed the case for failing to plausibly allege an agreement among the casino-hotels. The Third Circuit reversed that dismissal.
- The appeals court did not find that the defendants fixed prices, did not award damages and did not determine how Rainmaker actually operated. Those questions remain for later proceedings.
The ruling draws a line between businesses independently using the same software and competitors allegedly using one system to turn their confidential data into coordinated prices.
Transparency notice: This article is based on the Third Circuit’s precedential opinion in Cornish-Adebiyi v. Caesars Entertainment, Inc. The underlying conduct is described primarily through allegations in a consolidated amended complaint. Because the appeal followed a dismissal at the pleading stage, the court was required to accept well-pleaded allegations as true. It did not make a final finding of collusion or liability.
The Facts
Karen Cornish-Adebiyi, Luis Santiago and Monica Blair-Smith rented rooms directly from Atlantic City casino-hotels. Their consolidated complaint alleges that selected properties operated by Caesars, MGM and Hard Rock stopped making room-pricing decisions independently and instead participated in a pricing system supplied by Cendyn Group.
The properties identified in the case are Caesars Atlantic City, Harrah’s Resort Atlantic City, Tropicana Casino and Resort Atlantic City, Borgata Hotel Casino & Spa and Hard Rock Hotel & Casino Atlantic City. The plaintiffs seek to represent other direct renters, but the opinion describes the case as a putative class action; it does not establish that a class has been certified.
The alleged mechanism was Rainmaker, a suite of revenue-management products that recommended hotel-room prices using demand forecasts and other data. Cendyn acquired Rainmaker in 2019. The complaint says the defendant properties adopted Rainmaker products at different times, from as early as 2004 through 2018, and were all using its prescriptive pricing algorithm by the beginning of the alleged class period.
The metrics are allegations drawn from aggregate market reports cited in the complaint. They are not judicial findings that Rainmaker caused the changes or that any particular guest paid a specific overcharge.
How the Alleged Pricing Loop Worked
Dynamic-pricing software adjusts suggested prices as market conditions change. Used independently, it can help a hotel respond quickly to demand without violating antitrust law. The complaint alleges something more: competing hotels contributed commercially sensitive information to the same platform and received recommendations shaped by the collective data.
The properties could reject a recommendation. The complaint nevertheless alleges that overrides required special permission, were intended for “need and extreme circumstances,” and affected a score tracking how often a hotel departed from Rainmaker’s price or forecast. Those alleged controls, combined with the claimed 90% acceptance rate, mattered to the appeals court because formal authority to change a price does not necessarily establish independent pricing in practice.
The plaintiffs characterize the arrangement as a hub-and-spoke conspiracy. In that model, Cendyn and Rainmaker are the hub, the competing casino-hotels are the spokes, and an agreement among those competitors supplies the wheel’s outer rim. That alleged competitor-to-competitor agreement was the disputed element that led the district court to dismiss the case.
Who Was Affected—and What Hasn’t Been Proved
The directly affected group alleged in the complaint consists of guests who rented rooms from the defendant casino-hotels during a period beginning no later than June 28, 2018. The three named plaintiffs say they paid anticompetitively high prices because the properties did not undercut one another as independent competitors ordinarily might.
The opinion does not identify a dollar overcharge for any named guest, state how many renters would fall within the proposed class or establish that every room sold during the period was overpriced. It also contains no individual account of financial hardship or another personal consequence beyond the alleged higher room price.
For casino-hotels, room pricing has an unusual strategic role. The complaint alleges that inexpensive rooms historically helped bring people onto casino properties, where gambling and entertainment generated additional revenue. Falling occupancy would therefore normally give at least some properties a reason to lower room rates. According to the plaintiffs, the hotels instead maintained higher rates while occupancy declined, confident that competitors using the same platform would not undercut them.
Why the Appeals Court Found the Allegations Plausible
Similar prices alone do not prove an antitrust conspiracy. Competitors can independently react to the same market conditions and reach similar decisions. A complaint relying on circumstantial evidence must therefore allege parallel conduct plus additional facts that make coordination a plausible explanation.
Parallel conduct
The properties allegedly continued using the same pricing agent, accepted its recommendations about 90% of the time and experienced broadly rising rates or revenue alongside falling occupancy after 2017.
Sensitive data
Each property allegedly knew that Rainmaker’s recommendations incorporated current, non-public pricing and occupancy information supplied by competing casino-hotels.
Conduct against self-interest
The complaint alleges that properties declined to cut room prices even when lower occupancy gave them an individual incentive to attract more guests and associated casino spending.
The court also considered allegations about market concentration, years of financial pressure in Atlantic City’s casino industry, opportunities for executives to interact at industry events and a sudden change from historically independent room pricing. One Cendyn executive was quoted in a hospitality publication encouraging hotels to avoid the “race to the bottom” when competition became fierce. The complaint also alleges that Cendyn led industry discussions about maximizing room revenue while avoiding price wars.
None of those details independently establishes an illegal agreement. Taken together and treated as true, however, the panel held that they supported a plausible inference that the properties used Rainmaker to replace independent decisions with coordinated pricing.
What the opinion said
“To be clear, we do not make any assumptions or conclusions about how Cendyn’s dynamic pricing software works.” Third Circuit opinion, page 39
“At this stage, Plaintiffs have sufficiently alleged that a material exchange is likely occurring and facilitating collusion.” Third Circuit opinion, page 38
That distinction is central. The court did not inspect Rainmaker and conclude that it pooled data or fixed prices. It ruled that outsiders could not reasonably be expected to explain the internal workings of proprietary software before receiving access to evidence through discovery.
The Defendants’ Case for Dismissal
The defendants argued that the complaint described widespread use of a commercial product, not an agreement among competitors. The casino-hotels adopted Rainmaker products over a period of roughly 14 years rather than simultaneously. Each property retained final authority over its prices and could override a recommendation. They also argued that the complaint did not explain with enough specificity whether or how Cendyn pooled or commingled the hotels’ data.
The International Center for Law & Economics, participating in support of the defendants, warned against treating shared software as evidence of conspiracy by itself. Its brief compared the theory to gas stations using the same spreadsheet formulas or retailers relying on the same market-research firm.
The appeals court accepted the underlying caution: using an algorithm is not inherently anticompetitive, and multiple companies do not form a conspiracy merely by buying the same software. It found the comparisons incomplete because this complaint alleges the continuous exchange of confidential competitor data, automated price recommendations based on that data and unusually high adherence to those recommendations.
The legal question wasn’t whether several hotels bought the same tool. It was whether they allegedly used one tool to exchange sensitive information and replace independent pricing with a common plan.
From Alleged Conduct to a Revived Case
The complaint alleges that the casino-hotels adopted Rainmaker products at different points during this period.
The proposed class period begins. Plaintiffs allege that all defendant properties were then using Rainmaker’s prescriptive pricing algorithm.
Cendyn acquired Rainmaker. The complaint’s pre-pandemic comparison alleges declining occupancy and rising room revenue between 2017 and 2019.
The District of New Jersey dismissed the consolidated complaint, finding that it did not plausibly allege an agreement among the casino-hotels.
The Third Circuit heard oral argument on the guests’ appeal.
The appeals court reversed the dismissal and returned the case to the district court for further proceedings.
What the Court Actually Decided
The Third Circuit answered a limited procedural question: assuming the well-pleaded allegations are true, does the complaint plausibly allege an agreement to fix casino-hotel room prices under Section 1 of the Sherman Antitrust Act? The panel unanimously answered yes and reversed the dismissal.
Section 1 requires concerted action rather than independent business conduct. Horizontal agreements among competitors to fix prices are a classic category of restraints treated as illegal without the broader balancing applied to many other commercial arrangements. At this point, however, the plaintiffs have established only that their theory is plausible enough to proceed.
The ruling did not determine that confidential data was actually pooled, that Rainmaker caused any hotel to set a particular price, that the properties made an enforceable agreement or that guests paid damages. It also did not decide whether a class should be certified. The court expressly noted that the plaintiffs will face a higher burden as they develop the factual record.
Why the Ruling Matters Beyond One Hotel Market
The court’s broader legal point is that an agreement need not arrive through a meeting, telephone call or written promise. A shared algorithm can potentially perform the coordinating work once associated with direct communication: gathering sensitive inputs, translating them into common recommendations and making deviations easier to monitor.
That does not make dynamic pricing itself unlawful. The opinion recognizes that pricing software can improve demand forecasting, lower transaction costs and help businesses respond efficiently to changing conditions. Its limiting principle is independence. Competitors remain free to use technology, but the Sherman Act protects markets built around independent centers of decision-making.
The practical significance will depend on evidence not yet available in the opinion: what data entered Rainmaker, whether competitor information materially affected each recommendation, how often hotels departed from the suggested prices, and whether the resulting rates differed from prices produced through genuine competition.
The source document for this investigation is attached below.
