Federal Judge Rules in Favor of Atlantic City Casinos in Hotel Room Rate Case

Atlantic City casinos win a major legal battle as a federal judge dismisses a price-fixing lawsuit involving hotel room rates. (Image: Alamy)

Atlantic City casino operators won a major victory in court Tuesday, as US District Judge Karen Williams dismissed a proposed class action lawsuit accusing the resorts of price fixing on hotel rooms.

Williams dismissed the lawsuit with prejudice, which will prevent the case from being filed again.

Lawsuit Claims Rainmaker Software Promotes Collusion

In the lawsuit, consumers argued that the casino operators, including major gaming corporations like Caesars Entertainment and MGM Resorts, were using software known as Rainmaker to collude on pricing for hotel rooms throughout the city.

The plaintiffs alleged that the software, created by a company known as Cendyn—also a defendant in the case—allowed hotel owners to share real-time pricing and occupancy data on a shared software platform. The software would then offer pricing recommendations to the hotels.

The consumers who brought the case argued that this amounted to collusion between the resort operators, which allowed them to keep prices artificially high. Both the US Department of Justice and the Federal Trade Commission supported the consumers in their complaint.

“While the AI-driven technology at issue may be fairly novel, the underlying conduct is not,” the lawsuit claimed.

However, Williams rejected these arguments. She found that the plaintiffs in the case failed to show how the hotels were using any confidential data after providing it to the Rainmaker platform, making the case “factually and legally incomplete.”

Cendyn and the hotels had argued that there was no evidence, either direct or circumstantial, that proved that the resorts were agreeing to fix prices. The hotels were not required to accept the pricing recommendations from the software, though Cendyn says that its customers choose the “optimal” rate suggested by Rainmaker about 90 percent of the time.

The result was lower occupancy at Atlantic hotels across the board. However, average room rates rose enough to overcome the lower number of guests which led to room revenue in Atlantic City rising from $495 million in 2017 to $698 million in 2022.

Consumers Appealing Similar Ruling in Las Vegas

The case is a setback for consumers who are pursuing similar lawsuits in other jurisdictions. Another group of consumers accused Las Vegas resorts of violating antitrust laws by conspiring to fix hotel rates via a computer algorithm.

A federal judge in Nevada dismissed that lawsuit in May. However, the consumers who brought the case filed an appeal in the 9^th US Circuit Court of Appeals in San Francisco last Thursday, saying they had presented at least enough evidence of price fixing to allow the proposed class action lawsuit to move forward.

Chief US District Judge Miranda Du dismissed the lawsuit, finding that plaintiffs had failed to show that hotels were using Rainmaker at the same time, and that hotels weren’t bound to follow the software’s pricing recommendations. In their appeal, the plaintiffs are arguing that even a non-binding guideline, such as Rainmaker’s price recommendations, can restrain a competitive market.