United States: Third Circuit Revives Algorithmic Pricing Case

In this insight alert, authors Jeff D. Martino, Mark G. Weiss, Ashley Eickhof, Andrew Black & Madeline (Madi) Carr (Baker McKenzie) explain the Third Circuit’s decision allowing an antitrust class action involving Cendyn’s Rainmaker hotel revenue-management software to proceed past the motion-to-dismiss stage. The plaintiffs alleged that competing casino-hotels shared current, non-public pricing and occupancy data through Cendyn, received algorithmic pricing recommendations based on that information, and followed those recommendations approximately 90% of the time.

The court found that these allegations plausibly supported a hub-and-spoke conspiracy to fix room rates. In particular, it pointed to continuous use of the software, synchronized changes in prices and output, exchanges of competitively sensitive information, and other “plus factors” suggesting coordinated conduct. The court also found that preserving final pricing authority did not necessarily defeat the claim where hotels allegedly adhered to recommendations at a high rate and faced practical barriers to overriding them.

The authors stress that the decision is limited to the pleading stage and does not establish that Cendyn’s software is unlawful or that the defendants violated antitrust law. The court did not determine how the software actually operates and emphasized that independently used software designed to help businesses compete does not, by itself, create antitrust liability. The ruling instead highlights the importance of factors such as shared non-public competitor data, common pricing agents, high adherence to recommendations, and evidence of coordinated market outcomes.

The authors recommend that businesses using pricing and revenue-management tools map their software and data flows, identify whether current non-public competitor information is shared, and preserve meaningful independent pricing judgment. They also advise reviewing vendor contracts and controls, training commercial teams on algorithmic-pricing risks, and documenting legitimate procompetitive reasons for using such tools. The decision is likely to become an important reference point for assessing antitrust risks associated with algorithmic pricing systems…

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