MGM Resorts International, Caesars Entertainment, and Hard Rock International face a class action lawsuit in New Jersey over Atlantic City hotel room rates. The plaintiffs accuse the casino hotel operators of coordinating to fix room rates in violation of US antitrust law.
The suit, filed on May 9 in New Jersey District Court, also names Cendyn Group, a Florida-based tech-driven hospitality company. Cendyn bought and assimilated Rainmaker Group, the creator of the algorithmic pricing platform at the heart of the alleged price-fixing.
Lead plaintiffs Heather Altman and Eliza Wiatroski reside in New Jersey.
Their 109-page complaint alleges the defendants used Cendyn’s platform to set higher room rates than the market commanded. The casino hotels targeted are:
- Caesars Atlantic City
- Borgata
- Harrah’s Atlantic City, and
- Bally’s Atlantic City
Second Price-Fixing Suit Involving Cendyn’s Rainmaker Technology
The New Jersey lawsuit is the second class action of its type. Another, filed in Nevada in January, alleged similar price-fixing by a slightly different set of casino hotel operators using the Rainmaker platform.
That case brought similar accusations against Caesars and MGM. Although Hard Rock wasn’t a defendant in that case, Treasure Island and Wynn Resorts were named. The plaintiffs alleged that the companies had used the pricing algorithm to “maximize market-wide prices.”
The defendants have asked a Nevada federal judge to dismiss that case. However, we have yet to see a final decision, and defendants in both cases have declined comment.
According to the filing, New Jersey’s prospective class comprises “tens if not hundreds of thousands” of members.
Jointly, the plaintiffs seek unspecified compensatory and triple damages as federal antitrust laws allow.
Suit Claims Market Factors Don’t Explain Rate Boosts
The New Jersey plaintiffs argue that data from the state’s gaming regulator shows that sharp increases in Atlantic City room rates came alongside a drop in occupancy between 2018 and the present (class period).
According to the filing, data shows that in 2022, Atlantic City’s casino hotels raised room prices by 25% over 2019 rates. They also rented 5% fewer rooms.
The suit asserts that “no market factors,” like rising costs or heightened demand, can explain the “increase in room rates and corresponding revenue that casino-hotel defendants each have obtained during the class period.”
Those defendants, the lawsuit claims, “misrepresented to guests, through omissions, half-truths, and misrepresentations, how they determined room rates.”
The action explains that, traditionally, casino hotels set their room rates independently, based on market forces. And because hotel rooms on casino properties mainly exist to funnel guests to the casino floor, those rates have historically been lower than comparable conventional hotels.
Decades later, with help from technology like Cendyn’s Rainmaker platform, many operators depend on algorithms to maximize revenue and avoid losing customers to the competition.
But how does that technology work?
Essentially, reads the complaint, each casino hotel client continuously submits its current, non-public pricing and occupancy rates to the platform. From there, the algorithm processes and analyzes the data, similar data from participating competitors, and other relevant market details.
Having done that analysis, the algorithm generates “optimal” room rates for each client, which it updates multiple times daily.
Suit Claims Defendants Knowingly Artificially Inflated Hotel Prices
The filing alleges that by June 28, 2018, all named casino hotel defendants were using the Rainmaker pricing platform. Additionally, the suit claims the defendants now had the “means, motive, and ability to change their collective fortune.”
At this point, the action contends the defendants, with Rainmakers’ (then Cendyn’s) participation, knowingly used the Rainmaker algorithm platform to “fix, stabilize, and artificially inflate rental prices for guest rooms.”
The claim states the defendants “replaced a historically independent room pricing system in Atlantic City with an interdependent, collusive one.”
The contract, combination, or conspiracy alleged herein has consisted of a continuing agreement among Defendants for Casino-Hotel Defendants to knowingly and collectively use the Rainmaker pricing algorithm platform and engage in other related types of reinforcing conduct to fix, stabilize, and artificially increase the price of rooms rented directly to guests.
This conspiracy has caused Plaintiffs and the other Class members to pay artificially inflated prices directly to Casino-Hotel Defendants and their co-conspirators for room rentals in the Atlantic City Casino-Hotel Market during the class period.
All of the above claims must still be tested in court.
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