The Third Circuit Revives Algorithmic Pricing Case Against Hotels

California Lawyers Association E-Briefs, News and Notes
September 29, 2026

Karen Cornish-Adebiyi, et al. v. Caesars Entertainment, Inc., et al., No. 24-3006, 2026 WL 2182291 (3d Cir. July 26, 2026)

By Anna Ali

On July 29, 2026, the Third Circuit reversed the District of New Jersey’s decision to dismiss Plaintiffs’ claims that Defendants’ casino hotels violated Section 1 of the Sherman Act when they used a pricing algorithm tool to price hotel rooms. Karen Cornish-Adebiyi, et al. v. Caesars Entertainment, Inc., et al., No. 24-3006, 2026 WL 2182291, at *1-2 (3d Cir. July 26, 2026).

In their operative complaint, Plaintiffs alleged that Defendants sent their current, non-public room pricing and occupancy data to their software provider Cendyn Group, LLC’s Rainmaker software. Id. at *2. Rainmaker, an AI-powered dynamic pricing program, would process each Defendant’s non-public data, along with similar data provided by competitors, and generate room rate suggestions for each participating Defendant. Id. Thus, as alleged by Plaintiffs, Rainmaker functioned as a coordinating mechanism and used collective data to generate anticompetitive prices across participating Defendants. Id. The District Court of New Jersey dismissed Plaintiffs’ complaint because it found that Plaintiffs failed to sufficiently plead agreement between Defendants—i.e., the “rim” in a hub-and-spoke price-fixing scheme. Id.

In reversing the District Court, the Third Circuit held that advancements in technology and software capabilities, together with the growing use of artificial intelligence, have created an “obvious” potential for abuse. Id. at *2-3.While the court noted that there is nothing inherently wrong—or anticompetitive—with using algorithms in commercial activity, the programs may be used to “facilitate price-fixing and … collusion” and thus must be “treated with skepticism” to ensure that they do not cross the line established by the Sherman Act. Id. at *3, n.24 (quoting Brief for Antitrust Law & Economic Professors as Amicus Curiae Supporting Appellants, at 4).

Since Plaintiffs’ complaint relied primarily on circumstantial evidence to state a claim of collusion, the Third Circuit, in deciding to reverse the lower court’s decision, focused on whether Plaintiffs sufficiently alleged parallel conduct and “plus” factors. Caesars Entertainment, Inc., et al., 2026 WL 2182291, at *7. The court concluded that Plaintiffs’ two theories of parallel conduct were sufficient to show conscious parallel conduct. Plaintiffs based their first theory on allegations that Defendants “knowing[ly] and purposeful[ly]” used Cendyn’s software to set prices contemporaneously. Id. The court found that the key allegation was that, during the relevant time period, all Defendants delegated pricing decisions to Cendyn by accepting Rainmaker’s pricing recommendations 90% of the time. Id. The court also upheld Plaintiffs’ second theory of parallel conduct in the form of synchronous price and occupancy rate movement. Id. In their complaint, Plaintiffs included graphs indicating that after 2017, a year before the class period, there was a sudden upward trend in Defendants’ average daily room rates. Id. The graphs indicated that two years later, room rates had increased by an additional $15 to $60. Id. However, occupancy rates for all the Defendants, except one, “meaningfully decreased” during this time. Id. Plaintiffs alleged this downward trend, starting before and exacerbated by the COVID-19 pandemic, should have compelled at least some Defendants to drop prices but none did. Id.

The court also held that Plaintiffs sufficiently alleged several other “plus” factors to support an inference of collusion. Id. at *9. Plaintiffs alleged 1) Defendants had motive to conspire because of an extended period of financial hardship in the years preceding the class period; 2) Defendants’ adoption of Cendyn’s price recommendations was against their economic interests since they could have competed more aggressively on price; and 3) non-economic evidence showing exchange of non-public commercial information, opportunities to collude, and sudden changes in longstanding business practices. Id. The court concluded that these allegations, coupled with the allegation of 90% compliance with Cendyn’s recommendations, supported an inference that Defendants engaged in collusive pricing resulting in diminished competition. Id. at *11. The court, taking Plaintiffs’ allegations as true, held that the software effectively facilitated collusive conduct by receiving non-public commercial information from Defendants, and in return, giving each Defendant the benefit of their competitors’ non-public data in formulating a price recommendation with which Defendants purportedly agreed to comply. Id. Thus, the court reversed the lower court’s decision to dismiss due to inadequate consideration of Plaintiffs’ allegations, especially given the complexity and novelty of dynamic pricing algorithms. Id. at *12.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

This article was originally published in the California Lawyers Association E-Briefs, News and Notes: September 2026