Lawsuit: Vegas Strip resorts used vendor to fix hotel rates
Thu, Jan 26, 2023 6:44 PM
By KEN RITTER, Associated Press
LAS VEGAS (AP) — A federal lawsuit in Nevada is seeking class-action damages for countless hotel patrons who booked rooms in Las Vegas since 2019, alleging that most hotel-casinos on the Las Vegas Strip have used a third-party vendor to illegally fix prices.
The complaint filed Wednesday in U.S. District Court in Las Vegas alleges that casino giants MGM Resorts International and Caesars Entertainment, along with Treasure Island and Wynn Resorts, share information with a company that used pricing algorithms to “maximize market-wide prices.”
It accuses the resorts and Rainmaker Group Unlimited, a revenue management company owned by Cendyn Group, of “algorithmic-driven price-fixing … at the expense of consumers and in violation of antitrust laws.”
The Associated Press sent an email to Rainmaker seeking comment. Michael Bennett, a representative of Boca Raton, Florida-based Cendyn, declined to comment.
The lawsuit was filed on behalf of plaintiffs Richard Gibson and Heriberto Valiente by attorneys from the law firm of Hagens Berman Sobol Shapiro in Seattle and Berkeley, California.
It seeks class status and unspecified monetary damages for “tens of thousands if not hundreds of thousands” of people based on alleged antitrust violations of the federal Sherman Act.
MGM Resorts, which operates properties including Bellagio, New York-New York, MGM Grand and Mandalay Bay, responded Thursday with a statement calling the lawsuit “meritless.”
“The claims against MGM Resorts are factually inaccurate, and we intend to defend ourselves vigorously,” it said.
Wynn Resorts declined to comment. The Associated Press left messages seeking comment from representatives of Treasure Island and Caesars Entertainment.
Caesars Entertainment operates Las Vegas Strip properties including Caesars Palace, Harrah’s, the Horseshoe, Paris Las Vegas and the Flamingo.
In a statement, plaintiffs' attorney Steve Berman invoked and reshaped a ubiquitous advertising campaign tagline introduced in early 2003.
“What happens in Vegas will no longer stay in Vegas,” Berman said. “We intend to expose the under-the-table deals perpetrated by these Vegas hotels.”
Alan Feldman, a longtime MGM Resorts executive who is now a fellow at the International Gaming Institute at the University of Nevada, Las Vegas, said hotels, airlines and car rental companies monitor costs and prices throughout what he termed “the travel ecosystem."
“Rest assured, they watch each other,” Feldman said. “Then they can decide if they want to go above it, below it, or just ignore it.”
“But I can’t imagine these companies talking to one another,” he said, “and certainly not on price.”
The lawsuit points to concerns about algorithmic pricing identified in a 2017 speech by Maureen Ohlhausen, a former acting chairperson of the Federal Trade Commission.
Ohlhausen defined a computer algorithm as a set of rules or instructions that can model thousands of “extremely complex and nuanced behaviors” in a fraction of a second “and react almost instantaneously to changes.”
She said companies provide their pricing data to “a common, outside agent” that uses the information to program its algorithm “to maximize industry-wide pricing.”
“We even have an old-fashioned term for it,” Ohlhausen said, “the hub-and-spoke conspiracy.”
“In effect, the firms themselves don’t directly share their pricing strategies,” she said, “but that information still ends up in common hands, and that shared information is then used to maximize market-wide prices.”
The court filing said two former Rainmaker employees told attorneys the company's products are used by 90% or “just about every” property on the resort-lined Las Vegas Strip. The lawsuit didn't identify the former employees.
The Las Vegas Review-Journal reported that average daily room rates for Strip resorts hit record highs in 2022, topping $200 a night in October during a busy convention month.
For the year through November, the average rate was $170.45, the highest in history, and did not include add-on resort fees or account for complimentary rooms provided to high-rollers, the newspaper said.