Last month, a California federal court in Dai v. SAS Institute, No. 4:24-cv-02537 (N.D. Cal. 2025), dismissed a proposed antitrust class action complaint against six nationwide hotel operators alleging that the hotels’ common use of revenue management software to set their room prices amounted to a per se illegal “hub-and-spoke” conspiracy to fix hotel prices in violation of Section 1 of the Sherman Act.
Noting that class plaintiffs’ claims were “novel but not without precedent,” the court found that plaintiffs’ allegations were “analogous” to price-fixing allegations that were dismissed in Gibson v. Cendyn Group, No. 2:23-cv-00140 (D. Nev.), and Cornish-Adebiyi v. Caesars Entertainment, No. 1:23-CV-02536 (D.N.J.), which we have previously discussed (Gibson I, Gibson II, and Cornish-Adebiyi). In all three cases, plaintiffs did not rely on allegations of “direct” evidence of agreements among the hotel operators, but instead alleged that the hotel operators engaged in “parallel conduct” sufficient to infer a horizontal agreement.
As in Gibson and Cornish-Adebiyi, the court identified several deficiencies in plaintiffs’ allegations of parallel conduct. First, the court found that—like the plaintiffs in the Gibson cases—plaintiffs failed to identify when the hotel operators began to use the revenue management software or change their hotel room prices. Moreover, despite alleging that the hotel operators adopted the room pricing software’s recommendations “in nearly every instance,” they failed to allege facts showing the hotel operators’ acceptance rate. The court thus reasoned that, although plaintiffs were not required to allege that the hotel operators “acted at the exact same moment in time or at the exact same acceptance rate,” additional facts were needed to infer parallel conduct.
The court also concluded that plaintiffs failed to sufficiently allege “plus factors” because their allegations that the hotels shared nonpublic, competitively sensitive information were “conclusory.” Here, plaintiffs’ theory was that the hotels each provided their own confidential information to the software vendor, which then “pooled” that information with their competitors’ nonpublic information to generate room pricing recommendations that the hotels ultimately accepted. But the court explained that even if the hotel operators may have input their own confidential information into the vendor’s software, plaintiffs had not pleaded facts showing that the software “uses or pools that information in its algorithms” to generate price recommendations for other hotels. In other words, as in Cornish-Adebiyi and Gibson, the Dai plaintiffs had alleged only that “confidential information is fed in, but less clearly out, of the algorithms.”
The Dai decision reflects a further example of courts’ carefully scrutiny of price-fixing claims involving the use of revenue management software. Absent direct evidence of an agreement among competitors, courts are likely to continue to require plaintiffs to provide specific, factual allegations of parallel conduct and confidential information sharing to state a viable claim under Section 1 of the Sherman Act.