Federal Interest in Algorithmic Price-Fixing Cases Raises Concerns in Hotel Industry

The Federal Trade Commission (FTC) and the Department of Justice (DOJ) have shown heightened interest in cases involving alleged collusion and price-fixing facilitated by algorithms within the hotel industry. This development signals a broader examination of how algorithmic pricing practices impact consumers across various sectors.

According to the FTC, hotels are prohibited from engaging in collusion related to room pricing or using algorithms for activities that would be illegal if carried out by individuals. The agency highlighted the increasing reliance on algorithms by companies across industries, emphasizing the potential for anticompetitive behavior when a small group of algorithm providers dominates a market segment.

The recent filing of a “statement of interest” by the FTC and DOJ in the Cornish-Adebivi v. Caesars Entertainment case underscores the government’s stance against algorithm-driven price-fixing. This case involves allegations that multiple hotels conspired to fix room rates using a common pricing algorithm, potentially violating Section 1 of the Sherman Act.

Further lawsuits have surfaced, including an antitrust class action targeting major hotel chains for allegedly sharing data through market analytics platforms like Smith Travel Research and Amadeus Hospitality’s Demand360. These lawsuits allege that the exchange of occupancy data allows hotels to maintain artificially inflated room rates based on competitors’ information.

The involvement of algorithmic platforms in setting hotel prices has drawn scrutiny due to its potential impact on market competition and consumer welfare. The government’s position, as articulated in recent filings, aligns with efforts to promote fair competition and combat anticompetitive practices across industries.

President Joe Biden’s executive order on “Promoting Competition in the American Economy” reflects broader concerns about market concentration and the implications of technological advancements on competition dynamics.

Hotel industry stakeholders anticipate increased scrutiny and potential regulatory actions following these developments, which could reshape pricing strategies and data-sharing practices within the sector. The lawsuits and government interventions highlight a growing awareness of the challenges posed by algorithmic pricing practices and their regulatory implications.