The antitrust battle over algorithmic pricing took another turn with the revival of a class action against several Atlantic City hotels that use shared software to optimize pricing strategies for rooms. The decision today adds further risk for users of algorithmic pricing platforms. 

At the heart of every collusion case is an agreement. Antitrust law is filled with examples of bugged conference rooms, tapped phone lines, and other cloak-and-dagger means of catching the conspiracy in action. But algorithmic-pricing models and artificial intelligence tools help elude detection because they can facilitate agreements without leaving a trail from one conspirator to the other—the to-be-agreed price emerges from a black box of inputs and code. In Cornish-Adebiyi v. Caesars Entertainment Inc. (No. 24-3006), the Third Circuit Court of Appeals recognized the possibility of a conspiracy, even in the absence of allegations of express collusion. It held that the hotels' use of “Rainmaker” pricing software could facilitate price fixing, noting in particular that the hotels' correlated price bumps came amid sagging demand. That counterintuitive pricing behavior supplied the necessary oomph to push the plaintiffs' conspiracy claims across the line from possible to plausible. 

Businesses that use pricing software beware. Even if you don't expressly coordinate pricing with your competitors, feeding data and taking recommendations from the same pricing software as your competitors—particularly when the recommended price may appear to go against your normal economic interests—could trigger antitrust scrutiny. The algorithm's black box is the new smoke-filled room.