Guarding Against Algorithmic Collusion: Justice Department and FTC Set Antitrust Boundaries for Hotel Pricing

The Justice Department and the Federal Trade Commission have jointly submitted a statement of interest to the District of New Jersey in the Cornish-Adebiyi v. Caesars Entertainment case, clarifying that hotel corporations cannot sidestep antitrust regulations through the use of algorithms for room pricing collusion. This statement underlines a growing concern over the application of algorithms by businesses to set prices, which, when controlled by a limited group of providers, can significantly ease collusion among competitors. This risk is amplified in increasingly concentrated markets, where algorithms advising prices to competing hotels can obstruct the ability of travelers to effectively compare rates for the best deal.

The Agencies emphasize that to allege a conspiracy under Section 1 of the Sherman Act, it is not necessary for plaintiffs to prove direct communication between conspiring competitors, especially if they coordinate through a third-party algorithm provider. The statement also makes clear that any form of cooperation to fix prices, whether through direct staff action or algorithmic means, is illegal, even in the absence of direct competitor communication. Moreover, the use of shared pricing algorithms or recommendations remains illegal, regardless of whether co-conspirators have some leeway in final pricing decisions.

This guidance aims to protect consumers from the pitfalls of algorithmic collusion, reflecting the Agencies’ broader commitment to preventing anticompetitive practices in the digital age. With recent legal actions in both the residential housing market and a notable case involving price-fixing among meat processing companies, the statement serves as a cautionary reminder to firms employing algorithms for pricing, emphasizing the necessity to adhere to antitrust laws.

Karen Zekiri
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