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Federal Ruling Highlights DOJ’s Push Against Algorithmic Collusion in Antitrust Cases

By  |  December 9, 2024

A recent federal court decision has marked a pivotal moment in antitrust litigation, reinforcing the Justice Department’s (DOJ) stance that using algorithms to facilitate price-fixing is inherently unlawful. Judge Robert S. Lasnik of the U.S. District Court for the Western District of Washington ruled on December 4 that allegations against Yardi Systems Inc., a property management software firm, can proceed under the “per se” theory of antitrust law. This development comes as the DOJ increasingly focuses on the anticompetitive risks posed by algorithm-driven pricing.

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    A Shift in Legal Precedent

    Per Bloomberg, Judge Lasnik’s decision stands out by aligning with the DOJ’s theory that algorithmic collusion can qualify as classic price-fixing, even when landlords retain some discretion over pricing. The ruling allowed claims to advance that Yardi conspired with property managers through its RENTmaximizer tool to inflate rents, emphasizing that such behavior could automatically trigger antitrust violations without requiring additional proof of harm.

    This contrasts with earlier rulings in two similar cases involving hotel-casino pricing algorithms, where courts dismissed the claims. A Tennessee federal judge also applied a stricter standard in a case involving RealPage Inc., another property management software firm, last year.

    Legal experts view the Yardi decision as a critical step for plaintiffs pursuing claims of algorithmic collusion. “What the court is doing in Yardi is holding the line and refusing to read a heightened pleading standard into the law around price-fixing,” Lee Hepner of the American Economic Liberties Project told Bloomberg.

    Implications for Antitrust Litigation

    The ruling bolsters arguments from the DOJ that it is per se illegal for competitors to collectively delegate pricing decisions to an algorithm, even when they retain some authority to deviate from recommendations. According to Dylan Carson, a partner at Manatt, Phelps & Phillips LLP, the decision supports the notion that plaintiffs can proceed with claims by demonstrating that the shared use of pricing algorithms facilitated collusion.

    “This is a significant moment,” Carson noted, pointing out that plaintiffs in related cases may now have a stronger foundation to bring forward allegations involving price-setting software.

    Broader Legal Context

    The Yardi case is part of a broader wave of antitrust litigation targeting algorithm-driven pricing tools across industries like home rentals and hospitality. According to Bloomberg, the DOJ and Federal Trade Commission (FTC) have been advocating for courts to view such practices as inherently anticompetitive.

    However, significant hurdles remain. While the Ninth Circuit considers an appeal in a dismissed case involving hotel-casinos and Cendyn’s pricing software, defendants are expected to continue advocating for a “rule of reason” approach, which demands a more nuanced analysis of the alleged harm.

    Joshua Goodman, an antitrust attorney with Morgan, Lewis & Bockius LLP, observed that courts are divided on how to approach these cases. “There are several arguments for applying rule of reason to these types of cases,” Goodman stated, noting that the debate reflects the complexity of applying traditional antitrust principles to emerging technologies.

    Challenges in Navigating Emerging Technology

    Legal experts highlight the evolving nature of these disputes. Christine Bartholomew of the University at Buffalo School of Law told Bloomberg that judges’ comfort with evaluating cases involving new technologies varies widely. Meanwhile, Joseph Ostoyich, head of Clifford Chance’s U.S. antitrust litigation practice, underscored the nuanced issues involved, predicting that it may take years for courts to establish clear guidelines.

    Source: Bloomberg