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Atlantic City Casinos Face Lawsuit over Price Collusion

Antitrust regulators in the US are raising concerns that algorithms could be facilitating illegal price collusion among businesses, even in the absence of direct communication between company representatives. The Department of Justice (DOJ) and the Federal Trade Commission (FTC) have jointly submitted a statement of interest in a New Jersey court case involving Atlantic City casino operators, highlighting the potential for algorithms to be used as tools for anti-competitive behavior.

The case, Cornish-Adebiyi v. Caesars Entertainment, involves a class-action lawsuit filed by New Jersey residents. The plaintiffs allege that casino operators, in addition to Caesars, engaged in a price-fixing scheme by utilizing shared pricing algorithm solution Rainmaker. They argue that the companies knew their rivals also used Rainmaker, and that this platform served as a mechanism to maintain uniform, inflated prices.

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The DOJ and FTC's intervention in this case underscores their growing focus on the role of algorithms in antitrust issues. The regulators have previously intervened in similar cases, such as one involving RealPage, a software company dedicated to property management. In that case, tenants accused RealPage of helping inflate rental prices by allowing landlords to access and utilize non-public pricing information from each other.

Related: Vegas Casinos Win Court Battle over Collusion Claims

The companies named in the lawsuit are defending themselves by arguing that the Sherman Act, which prohibits collusion in restraint of trade, requires proof of direct communication between competitors. They further claim that the lawsuit lacks merit because the algorithm only provides recommendations and does not enforce mandatory prices.

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DOJ, FTC Clap Back

However, the DOJ and FTC strongly disagree with these arguments. They contend that the plaintiffs do not need to show explicit communication to establish a violation of the Sherman Act. As long as there is a shared understanding or common objective among the companies using the pricing platform, their collective actions can be considered collusion.

The regulators also dismiss the companies' claim that the non-binding nature of the algorithm's recommendations absolves them of wrongdoing. They point to legal precedents that establish setting list prices as a violation of the Sherman Act, regardless of whether final transaction prices deviate from those recommendations. The key issue, according to the DOJ and FTC, is the existence of an agreement to maintain a certain price level, not the specific way that agreement is enforced.

Furthermore, the regulators reject the notion that a price-fixing scheme can be disguised by allowing some flexibility in pricing or by involving companies that might occasionally set their own prices outside the scheme. They emphasize that the very act of agreeing to a pricing strategy, even with some wiggle room, constitutes a violation of antitrust laws.

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