The Corner Newsletter: June 07, 2024
Welcome to The Corner. In this issue, we explore the impact a recent court ruling dismissing allegations of algorithmic price-fixing might have on similar cases such as the one against real estate software company RealPage.
Algorithmic Price-Fixing Cases Threatened by District Court Decision
Bria Smith
Last month, federal District Court for Nevada judge Miranda Du tossed out a class action lawsuit accusing a group of Las Vegas hotels — Caesars Entertainment, Wynn Resorts, MGM, and Treasure Island — of using algorithms provided by Cendyn Group to raise and fix prices for rooms. Du rejected claims that the algorithms had enabled the hotels to share competitively sensitive information with competitors.
Du’s decision now threatens a set of other similar cases around the United States. Perhaps the most important of these lawsuits is a federal antitrust class action accusing the property management software company RealPage of using algorithms to fix rental prices across the country beginning in 2016. The plaintiffs, who claim RealPage enabled landlords to share proprietary information with one another, filed their suit in U.S. Middle District of Tennessee.
The two cases are closely linked. RealPage implements the same business model for rentals as Cendyn does for hotel rooms. In fact, according to the Las Vegas class action, RealPage acquired the rent-setting software at the center of its case from Cendyn, a software company serving the hospitality industry. RealPage and other similar platforms being sued around the country have begun to reference Du’s decision in attempts to get their cases dismissed.
Earlier this week, the Las Vegas plaintiffs appealed Du’s ruling. The argument backing that appeal has yet to be filed with the U.S. Court of Appeal for the Ninth Circuit, but prior proceedings in the case give hints at potential key points for contention. For example, during a briefing over a motion to dismiss the Las Vegas case, the plaintiffs for hotel guests alleged that the group of Las Vegas hotels turned over competitively sensitive information to Cendyn, an action that would create liability for participating in an illegal price-fixing conspiracy.
Another potential argument involves how Du handled the motion to dismiss. Traditionally, in response to a motion to dismiss, judges interpret facts in the light most favorable to the plaintiffs. But Du instead interpreted evidence in a way that undercut their claims of improper information-sharing. That evidence included marketing materials and other industry reports explaining how hotels and other real estate clients are obliged to provide competitively sensitive information to so-called “revenue management software” programs.
For instance, in the original suit, the plaintiffs flagged a claim in Cendyn’s marketing materials that 90% of pricing recommendations by the company’s price-setting software are accepted by customers. Du, an Obama appointee, reasoned that this was not an example of the hotels delegating their independent pricing decisions, because the 10% of rejected recommendations could have disproportionately come from the hotels.
Writing about a similar case in 2017, then Acting Federal Trade Commission Chair Maureen Ohlhausen underscored the parallel between a smoke-filled room of people making back-room deals and an algorithm engineering the same outcomes. The legal principles around anticompetitive conduct applies regardless of whether that conduct involves “a guy named Bob” or a pricing software company, Olhausen wrote.
In statements of interest filed in multiple cases, the DOJ and FTC have already offered key guidance on the application of antitrust law to price-fixing claims involving algorithms. The guidance makes clear that illegal agreements don’t require direct communication between co-conspirators, because sharing pricing recommendations is illegal even when co-conspirators retain some pricing discretion. The agencies also made clear that evidence of concerted action can take many forms.
The DOJ last November, in commenting directly on the RealPage case, wrote that: “[A] defendant cannot ‘shield it[self] from the consequences’ of organizing a price-fixing cartel merely because it organizes the cartel through disseminating a software program." States attorneys general in Arizona and the District of Columbia have also brought lawsuits against RealPage.
Other federal courts are currently weighing whether to dismiss similar algorithmic price-fixing cases over alleged schemes involving New Jersey hotels, multifamily housing landlords, and health insurance companies. The defendants in those cases are taking advantage of Du’s ruling to support their requests for dismissal of their cases.
Although rulings from different jurisdictions are merely persuasive, the relative lack of cases with similar fact patterns increases the importance of these early-stage efforts to properly define the problem.
Open Markets Institute Executive Director Barry Lynn Testifies Before Congress on Resiliency
Open Markets executive director Barry Lynn this week testified before the Senate Committee on the Judiciary, Subcommittee on Competition Policy, Antitrust, and Consumer Rights at a hearing entitled “Strengthening U.S. Economic Leadership: The Role of Competition in Enhancing Economic Resiliency." In his testimony, Lynn said that concentration of vital industrial and computing capacity poses many extreme, even existential threats to the United States and the American people. “One of the most important actions Congress can take today is to require the antitrust agencies to acknowledge the role that competition law and enforcement play in engineering how complex systems are physically structured,” Lynn said. Read his full testimony here and watch him testify here.
Open Markets and Guardian to Host Conference on America’s Information Crisis on June 27
The Open Markets Institute and The Guardian US will host a conference June 27 at the Press Club in Washington on America’s information crisis and solutions to the problem. Speakers will include European Competition Commissioner Margrethe Vestager and Jonathan Kanter, assistant attorney general for antitrust at the Department of Justice. It will also include comments by Sen. Elizabeth Warren, Sen. Amy Klobuchar, and others. The discussion will focus on ways to bolster the supply of trustworthy journalism, address the problem of tech platforms manipulating and censoring what individuals read, and stop corporations from taking the work of journalists and publishers without compensation. The timing of our event could not be more critical, with vitally important elections this year in the U.S., UK, Europe, and more than 50 countries around the world. RSVP for the event here.
OMI Co-Hosts Two More June Events on Food Monopolization and Private Equity in Childcare
The Open Markets Institute and the filmmakers behind Food, Inc. 2 will host a virtual roundtable discussion, “Too Big to Feed: The Threats of Corporate Consolidation on the Food Supply,” on June 12 at noon ET. Speakers include Eric Schlosser, producer of Food Inc. 2 and author of Fast Food Nation; Max Miller, attorney advisor to Federal Trade Commissioner Alvaro Bedoya; and Claire Kelloway, food program manager for the Open Markets Institute. The discussion will focus on the monopolization of our food system and what policymakers can do to break them up. Register for the roundtable here.
The Open Markets Institute, National Women’s Law Center, and Community Change will convene policymakers and advocates on June 24 for an all-day event, “Children Before Profits: Addressing the Risks of Private Equity in the Child Care Industry,” to discuss how to protect the child care industry from destructive forms of private equity investment. The event comes at a time when PE funds are disrupting industries from nursing homes to family doctors’ practices, mainly by rolling up independent service providers into large corporate chains. The event will take place in Washington D.C. at the Eaton Hotel. Please RSVP for the event here.
📝 WHAT WE'VE BEEN UP TO:
Open Markets Institute’s Europe director Max von Thun published an article in ProMarket outlining a new economic vision for the European Union that would center competition policy and that pushes back on the notion of creating European champions. “A growing mountain of evidence demonstrates that market concentration produces a wealth of harms beyond just higher prices for consumers, from higher inequality and lower wages to weaker resilience, less innovation, and reduced investment,” von Thun wrote. “None of that is a recipe for European competitiveness, let alone security or prosperity.”
Open Markets’ legal director Sandeep Vaheesan coauthored an article in Heatmap News calling for public investment in the national electricity infrastructure to facilitate the transition to clean energy over the coming decade. “Private utilities have had decades to deliver a modern grid and failed,” the article read. “Because of the pressing need to decarbonize and fortify resilience against entrenched climate instability, the necessity of building state capacity is a sober reality.”
Center for Journalism and Liberty director Dr. Courtney Radsch spoke on a panel, “Sustaining the Press Function,” at the Knight First Amendment Center symposium. Dr. Radsch spoke about how competition policy can more challenge the tech monopolies damaging the viability of news outlets.
Open Markets Executive Director Barry Lynn spoke at the Lennart Meri Conference on International Security in Tallinn, Estonia. Lynn discussed the political, economic, and systemic dangers posed by extreme concentration of industrial capacity, especially in China. Other speakers included former Swedish Prime Minister Carl Bildt; Philippe Lavigne, Supreme Allied Commander Transformation of NATO; Ben Hodges, former Commander of U.S. Army Euorpe; and Jim Sciutto of CNN.
Lynn also had a private breakfast with European Commission Executive Vice President Margrethe Vestager, in Brussels. The meeting was covered in Politico.
Dr. Courtney Radsch also appeared on the "vodcast" Aimpactful to discuss the impact of tech platforms on journalism, the role of AI in news dissemination, and the importance of ethical considerations in tech policy. “Efforts by tech companies to narrow down the concept of what value news provides is really dangerous because of course, we know there is this huge problem with mis- and disinformation,” she said.
Dr. Radsch commended the UK Competition Appeal Tribunal for its decision to put Google on trial for monopolizing the online advertising market and diverting revenues from publishers. “This is a welcome move: it is long due to scrutinize the conflicts of interest in a market that Google exploits to its advantage, hurting publishers' revenues and degrading our information environment," she said. The decision comes just months before the U.S. Department of Justice is scheduled to take Google to trial in the U.S. for its adtech monopoly behavior, a trial that our senior reporter Karina Montoya is following closely.
Open Markets Institute Food Program manager Claire Kelloway applauded the Department of Agriculture’s new proposal to ensure that poultry processing corporations maintain a transparent base pay for growers. “We’re encouraged to see USDA using its powers under the Packers and Stockyards Act to bring much needed fairness for poultry farmers,” Kelloway said. “These proposals would be an essential step forward, however, their success would depend on more vigorous enforcement of the Packers and Stockyards Act and, ultimately, greater efforts to break up consolidated chicken corporations’ market power over farmers.”
Wisconsin senator Tammy Baldwin quoted Open Markets Institute’s legal director Sandeep Vaheesan in a press release her STOP Bad Mergers Act, which she recently introduced to crack down on mergers that result in higher prices and fewer American jobs. “Her STOP Bad Mergers Act would help identify mergers and acquisitions that have harmed labor and empower working people and their unions to participate in the merger review process and to share their industry and market knowledge with the Department of Justice and Federal Trade Commission,” Vaheesan said.
Common Dreams quoted Vaheesan’s statement on the Department of Justice’s suit to break up the entertainment and ticketing monopoly Live Nation-Ticketmaster in an article on the move.
The Wrap noted that the Open Markets Institute joined signatories Fubo, Dish Network, DirecTV, American Economic Liberties Project, and Sports Fan Coalition, on a letter urging Congress to hold hearings on Venu Sports Bundle, a joint streaming venture owned by Disney, Fox, and Warner Bros. Discovery, which raises “serious competition concerns.”
🔊 ANTI-MONOPOLY RISING:
The Justice Department and the Federal Trade Commission struck a deal to divvy up responsibilities in investigating the dominant roles of Microsoft, OpenAI, and Nvidia in the AI industry. The arrangement will see the DOJ lead the investigation into whether Nvidia, the biggest AI chip maker, violated antitrust laws, while the FTC will lead the probe into OpenAI, which makes the ChatGPT chatbot, and Microsoft, which has invested $13 billion in OpenAI. (New York Times)
A class action antitrust trial against the National Football League kicked off in Los Angeles on Wednesday after years of delays. The case could see the sports league pay billions of dollars over allegations they violated federal antitrust law by limiting distribution of games through restrictive broadcasting agreements and artificially inflating prices. (Reuters)
New Jersey and California both announced plans to substantially grow their state-level competition enforcement personnel, with the former creating a permanent antitrust office for the first time. (Regulatory Oversight)
Credit reporting giant Equifax was sued in federal court in Philadelphia by two home mortgage companies who allege Equifax has created a monopoly on electronic verification services that has allowed them to inflate prices. (Reuters)
📈 VITAL STAT:
70%
The percentage of multifamily apartment buildings across the country influenced by rental price recommendations given by RealPage, a software company at the center of a price-fixing investigation. (Competition Policy International)
📚 WHAT WE'RE READING:
How Pricing Really Works: In its June issue, The American Prospect dives into the way corporations have transformed pricing practices in the era of mass surveillance and unrestrained algorithmic decision-making. The sweeping issue, which also covers the rise of junk fees and the advent of the subscription economy, also suggests several concrete steps — some of which the Biden administration is already taking — to rein in increasingly outlandish pricing practices.
🔎 TIPS? COMMENTS? SUGGESTIONS?
We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue.