In a potentially significant development, on July 29, 2026, the Third Circuit Court of Appeals reversed the dismissal of the operative complaint in Cornish-Adebiyi v. Caesars Entertainment, Inc., No. 24-3006, a putative class action filed by casino-hotel guests alleging that certain casino-hotels in Atlantic City conspired with one another through their algorithmic software provider to fix the prices of their hotel rooms in violation of Section 1 of the Sherman Act. This decision is significant because several district courts have dismissed Section 1 claims based on the use of algorithmic pricing software, and prior to Cornish-Adebiyi, the only appellate court to address the issue—the Ninth Circuit—affirmed dismissal.
The complaint alleged that each defendant utilized Defendant Cendyn’s “Rainmaker” software, an “AI-powered dynamic pricing program,” as part of an alleged price-fixing agreement. The casino-hotels allegedly inputted their “current, non-public room-pricing and occupancy data” into Rainmaker and received recommended room rates in return. This arrangement allegedly led consumers to pay anticompetitively high prices for hotel rooms.
The district court had granted the Defendants’ motion to dismiss on the grounds that the Plaintiffs had failed to sufficiently plead a “rim” to their “hub-and-spoke conspiracy”—in other words, the Plaintiffs had not plausibly alleged that there was an agreement between the casino-hotels to use Cendyn to set their prices. On appeal, the Third Circuit considered whether the complaint plausibly alleged an agreement among the competitors based largely on circumstantial evidence. The Circuit found the alleged parallel conduct sufficient, based principally on the allegation that the casino-hotels adopted Rainmaker’s pricing recommendations 90 percent of the time.
The Third Circuit also pointed to additional alleged facts in the complaint (known as “plus factors”), including (1) the alleged motive of the casino-hotels to conspire due to financial hardship in the years preceding the class period, (2) the alleged adoption of Rainmaker’s pricing suggestions even when undercutting competitors allegedly would have been the superior individual economic decision in the absence of collusion, and (3) alleged “de facto data exchanges” between the casino-hotels via the Rainmaker software. Regarding the alleged data exchanges, the district court had found it a “fatal defect” that the complaint did not allege that confidential information was directly transmitted from one “spoke” to another (i.e., between hotels) via the “hub.”
The Third Circuit found the allegations sufficiently plausible “in the context of AI-driven dynamic pricing,” and rejected the district court’s call for the plaintiffs to “plead with more specificity how the algorithm functions to facilitate the exchange of information,” reasoning that the Plaintiffs should not be expected to plead exactly how a complex software program like Rainmaker functions without the benefit of discovery. The Court held that, “taking Plaintiffs’ allegations as true, the software is, in effect, facilitating collusive conduct by receiving from each client non-public commercial information, and, in return, giving each client the benefit of their competitor’s non-public data in formulating a price recommendation which Defendants purportedly agree to comply with.”
While the Third Circuit ultimately concluded that the district court’s dismissal of the complaint should be reversed, the Circuit emphasized that the opinion should not be taken to mean that it is necessarily a violation of the antitrust laws merely by using the same independently-operated software. However, the Third Circuit held that under the circumstances alleged, collusion can be plausibly inferred where an algorithm is “in effect collecting non-public commercial information from defendants and utilizing the collective pot of data to ‘suggest’ prices to each.”
The application of the antitrust laws in the context of algorithmic pricing software is an evolving issue. Companies using, developing, or interacting with such software should consult with antitrust counsel to ensure that they understand the potential antitrust risks as well as potential steps that they can take to reduce those risks.
If you have any questions concerning the material discussed in this client alert, please contact the following member of our Antitrust/Competition practice.
Back
