Consumer Antitrust Lawsuit Filed Against Las Vegas Hotel and Casino Companies
If you’re into miles and points and especially if you have several Amex Platinum cards, then you can often find affordable stays in Las Vegas. But not everyone is happy with prices at some of the major hotels and casinos in Sin City.
A lawsuit filed this week in federal court in Nevada claims that some of the biggest hotels on the Las Vegas strip are colluding to overcharge for rooms through an algorithm designed to maximize their profits.
The defendants named in the lawsuit include MGM Resorts International, Caesars Entertainment Inc., Wynn Resorts Holdings LLC and Treasure Island LLC. Some of the most popular hotels operated by these companies are Bellagio, Wynn, Caesar’s Palace, MGM Grand, Harrah’s, and Mandalay Bay.
Besides the hotel operators, Cendyn Group LLC and its subsidiary Rainmaker Group Unlimited Inc., were also named as defendants. They are the suppliers of the pricing algorithms. The lawsuit says that Rainmaker Group’s products are used by 90% of the hotels on the Las Vegas Strip.
The plaintiffs are a pair of frequent visitors to Las Vegas who claim they paid too much for their rooms as a result of an anticompetitive scheme.
“Following widespread adoption of Rainmaker’s pricing algorithms, Defendant Hotel Operators swiftly shifted from the previous competitive status quo to a new strategy, facilitated by Rainmaker: increasing prices notwithstanding market conditions and tolerating the lost revenue resulting from any unrented rooms,” according to the lawsuit. “In a competitive market, this strategy would quickly fail—any units listed at prices exceeding the market price would be undercut by competitors and thus stay empty. A Hotel Operator with overpriced, empty rooms would eventually go out of business.”
Rainmaker algorithm “collects confidential price information from each of the hotel operators, and then tells them, through use of various algorithms, how to price,” the lawsuit says. Cendyn’s marketing materials tout that Rainmaker Group obtains a 90% acceptance rate for its pricing recommendations. The lawsuit quotes a Rainmaker executive and two former employees there, each of whom were identified as a confidential witness.