On August 15, 2025, the U.S. Court of Appeals for the Ninth Circuit raised the bar for bringing antitrust claims against companies that provide or use pricing algorithms. The decision begins to clarify an area of antitrust law that has been tested recently by several civil cases and the U.S. Department of Justice (DOJ). In sum, the Ninth Circuit held that independently subscribing to a pricing algorithm alone does not constitute the requisite “restraint of trade” under the antitrust laws, even when the subscriber knows its competitors are using the same algorithm.1
Background
The plaintiffs comprised a putative class of individuals that regularly rented hotel rooms on the Las Vegas Strip. The plaintiffs claimed that hotel rates in Las Vegas were artificially inflated by five hotel entities (collectively, Hotel Defendants) that subscribed to the pricing algorithms of two software providers (Cendyn Group, LLC and The Rainmaker Group, Unlimited, Inc., collectively, Cendyn) in violation of the antitrust laws.
Specifically, the plaintiffs brought two claims under Section 1 of the Sherman Act, which prohibits agreements “in restraint of trade.” First, the plaintiffs claimed that the Hotel Defendants restrained trade by agreeing among themselves to subscribe to Cendyn’s algorithms and abide by the pricing recommendations set by those algorithms (the “hub-and-spoke” price-fixing claim). Second, the plaintiffs claimed that the subscriptions between Cendyn and the individual Hotel Defendants “in the aggregate” restrained trade as they effectively inflated hotel rates.
The U.S. District Court for the District of Nevada first dismissed the plaintiffs’ complaint without prejudice in October 2023, and the plaintiffs filed an amended complaint in November 2023. After a full briefing and hearing, the court dismissed both claims again and with prejudice on May 8, 2024, and the plaintiffs appealed the decision to the Ninth Circuit. The plaintiffs abandoned the appeal of the first claim (“hub-and-spoke” price-fixing claim), and therefore, the Ninth Circuit’s decision focuses only on whether plaintiffs adequately stated the second claim regarding the subscription agreements.
The Ninth Circuit Decision
The Ninth Circuit held that the plaintiffs failed to state an antitrust claim when alleging that competing Hotel Defendants independently subscribed to the same algorithm for setting hotel rates, even when the Hotel Defendants knew that each was subscribing.2 The Ninth Circuit focused on the lack of allegations that the subscriptions by themselves changed the incentive or ability of the Hotel Defendants to compete in the supply of Vegas hotel rooms.
The Ninth Circuit pointedly stressed that the case would be much different if the plaintiffs had adequately alleged that the Hotel Defendants agreed among each other to subscribe to the algorithms (i.e., a horizontal agreement among competitors to use a pricing service).3 The Ninth Circuit also noted that its analysis might have been different if the plaintiffs had alleged that the algorithm pooled, shared, or used the information provided by competing hotels when generating price recommendations for each Hotel Defendant. The plaintiffs alleged only that the algorithms might have relied on the subscriber’s own confidential information in providing rate recommendations, and did not allege that any pooling of competitor data occurred.4
The plaintiffs argued that the “mere identification of a contract” (i.e., the subscription agreements between Hotel Defendants and Cendyn), plus the allegation that hotel room rates increased after the subscription, is sufficient to allege an antitrust violation.5 The Ninth Circuit disagreed, challenging the idea that the subscription agreements themselves had the requisite “effect” on competition. The Ninth Circuit observed that the plaintiffs “confuse cause and effect,” as “charging a higher price by itself is not anticompetitive.”6 Rather, the antitrust laws require the agreements at issue (here, the subscriptions) to have “a discrete effect on competition,” but the plaintiffs’ allegations failed in that regard.7
The plaintiffs had also argued that the subscriptions restrained competition because the Hotel Defendants knew that their competitors also subscribed to the software, but the Ninth Circuit again disagreed. The Ninth Circuit observed how the law does not require businesses to “turn a blind eye to information simply because its competitors are also aware of that same information.”8 Nor does the law “require businesses to decline to take advantage of a service because its competitors already use that service.”9
Key Takeaways
While a win for defendants in this case, the Ninth Circuit’s decision here is unlikely to change either private plaintiffs’ or the government’s appetite for scrutinizing and/or challenging the use of pricing algorithms by market competitors across various industries. In fact, DOJ Assistant Attorney General for the Antitrust Division Gail Slater suggested earlier last week that the DOJ expects to ramp up investigations into potential collusion by way of pricing algorithms as the technology becomes more prevalent across the U.S. economy.10
That said, this decision will make it more challenging for such plaintiffs to bring a case that relies principally on the theory that such pricing algorithms facilitate information-exchanges of competitively sensitive information among competitors merely because they use the same third-party service/software to make independent business decisions.
In any industry, companies should continue to seek antitrust advice before using or supplying algorithms or revenue management software to inform pricing decisions, particularly when it uses competitor pricing or supply data. In general, programs that involve the following features will increase the antitrust risk of using such software:
- using or disclosing confidential, nonpublic pricing information;
- using or disclosing current (“real time”) or future pricing data;
- providing a “default” or “recommended” price (even if only a “starting” price);
- encouraging or enforcing adoption of the software’s recommended or default price;
- competitors agreeing with each other to subscribe to the same third-party pricing software or information service; and
- asymmetry in access to the service or software, e.g., only sellers have access to the information provided by the service.
For more information about the implications of this case or the use of algorithmic pricing or revenue management software generally, please contact any member of the firm’s Antitrust and Competition practice.
[1] Gibson, et al. v. Cendyn Group, LLC, et al., No. 24-3576 (9th Cir. Aug. 15, 2025), ECF No. 77.
