Third Circuit Revives Pricing Algorithm Collusion Claims Against Casino Hotel Owners

Since the first case alleging "collusion by algorithm" was filed in October 2022, see Compl., Bason, et al. v. RealPage, Inc., No. 3:22-cv-01611 (S.D. Cal. Oct. 18, 2022) (ECF No. 1), courts have grappled with the facts plaintiffs must plead in a complaint to plausibly allege that an agreement to use pricing software in making pricing decisions violates Section 1 of the Sherman Act. An emerging consensus among courts appears to be that, if plaintiffs allege competitors contributed non-public, competitively sensitive information to the software company, which pooled the data for use by an algorithm in making pricing recommendations, then plaintiffs' claims of an agreement among the users of the pricing software could survive a motion to dismiss. However, if plaintiffs did not or could not allege that pricing recommendations were based on pooled, competitively sensitive information, then claims of a "horizontal" agreement between competitors using the pricing software would be dismissed.

The U.S. Court of Appeals for the Third Circuit on July 29, 2026, in Cornish-Adebiyi v. Caesars Entertainment, Inc., 2026 WL 2182291 (3d Cir. July 29, 2026), appeared to accept that, to plead a plausible agreement among users of software that based pricing recommendations on an algorithm, plaintiffs must allege the software company pooled competitively sensitive information contributed by its users and used that pooled data in recommending prices. But the Third Circuit also expressed an unusual degree of skepticism concerning pricing algorithms in general based on observations about pricing algorithms not alleged in the complaint. This skeptical approach likely caused it to take a significantly less critical view of plaintiffs' allegations than it would have otherwise. If adopted in future cases, this approach would lower the bar for plaintiffs asserting collusion-by-algorithm claims.

Consensus Emerging from District Court Cases

In In re RealPage, Inc., Rental Software Antitrust Litigation, No. 3:23-md-2071 (M.D. Tenn.), the court denied motions to dismiss collusion-by-algorithm claims, rejecting the defendant multifamily apartment owners' argument that plaintiffs alleged only a series of licensing agreements between them and RealPage but no horizontal agreement between the apartment owners. The "most persuasive evidence of horizontal agreement," the court found, was the "simple undisputed fact that each [apartment owner] provided RealPage its proprietary commercial data, knowing that RealPage would require the same from its horizontal competitors and use all of that data to recommend rental prices to its competitors." In re RealPage, Inc., 709 F. Supp. 3d 478, 510 (M.D. Tenn. 2023). In other words, RealPage allegedly pooled competitively sensitive information contributed by each multifamily apartment owner and made pricing recommendations to each based on that pooled information. The court evaluating claims concerning use of apartment pricing software offered by Yardi Systems reached the same conclusion. Duffy v. Yardi Systems Inc., 758 F. Supp. 3d 1283, 1293 (W.D. Wash, 2024) (observing that the apartment owners allegedly used Yardi "to compile their commercially sensitive data and calculate the supracompetitive rental rate each participant would utilize").

But in cases in which plaintiffs could not or did not allege that the pricing software relied on pooled, competitively sensitive information supplied by competitor users of the software, courts granted motions to dismiss. In Gibson v. Cendyn Grp., LLC, 2024 WL 2060260, at *3 (D. Nev. May 8, 2024), the court dismissed claims that Las Vegas casino hotels conspired with one another by using common software to assist in pricing hotel rooms. In contrast to the allegations in RealPage, the court observed that plaintiffs failed to allege that the hotels "share confidential information with each other by using" the pricing software. Id. at *5. The court overseeing claims against Atlantic City hotels for use of the same pricing software relied heavily on the Gibson decision and also dismissed plaintiffs' claims. Cornish-Adebiyi v. Caesars Ent., Inc., 2024 WL 4356188 (D.N.J. Sept. 30, 2024). In spite of the "rather extraordinary lengths" the plaintiffs went to in their complaint "to dance around [the] allegation with linguistic equivocation in an obvious attempt to imply" that the algorithm's pricing recommendations are based on competitively sensitive information provided by all users of the software," the court found plaintiffs' complaint "never unambiguously alleges as much." Id. at *4. As the court found, the complaint "does not allege that the [hotels'] proprietary data are pooled or otherwise commingled into a common dataset against which the algorithm runs." Id.

Third Circuit Lowers the Bar for Plaintiffs to Plead Collusion-by-Algorithm Claims

The Third Circuit reversed the district court's decision in Cornish-Adebiyi on July 29, 2026, finding that plaintiffs had alleged sufficient facts concerning use by Atlantic City hotels of common pricing software to plausibly plead an agreement among competitors and survive a motion to dismiss. Contrary to the district court's interpretation of plaintiffs' allegations, the Third Circuit found that plaintiffs alleged that the software "processes each casino-hotel's non-public data 'along with' similar data provided by their competitors" and used that "collective data to generate anticompetitive prices across participating casino-hotels." Cornish-Adebiyi, 2026 WL 2182291, at *2 (emphasis added). The court observed that "Defendants allegedly gave [the software company] … proprietary information knowing that competitors would benefit from it" and the algorithm generated pricing recommendations based on "non-public pricing and occupancy data shared by each hotel [d]efendant with the platform." Id. at *7. Thus, the Third Circuit found – contrary to the district court – that pricing recommendations were based on pooled sensitive information contributed by each hotel. Additionally, in finding that plaintiffs' allegations plausibly supported the existence of an agreement among the casino hotels, the Third Circuit emphasized that there had been significant departure in "synchrony" from pricing and occupancy trends that preceded adoption of the pricing software, including under "economic circumstances that should typically lead to competitive price-cutting." Id. at *7-8. Under those circumstances, the court observed that the failure of the hotels to seek to reduce rates to compete for potential hotel guests "certainly supports an inference of collusion; indeed, we can think of no other explanation." Id. at *10.

The Third Circuit's interpretation of plaintiffs' allegations departed dramatically from the district court's interpretation, which found the allegations lacking. Significantly, in doing so, the Third Circuit faulted the district court for not viewing the allegations "in context with the complexity and novelty of dynamic pricing algorithms," id. at *12, which the Third Circuit panel views to offer strong potential to "facilitate anticompetitive behavior … in ways that were inconceivable in 1890" when Congress adopted the Sherman Act. Id. at *1.

If future courts considering allegations of collusion based on use of common pricing software view the software through the same skeptical lens, plaintiffs in those cases will have a significantly greater likelihood of surviving motions to dismiss. The Third Circuit did not materially deviate from the emerging consensus that plaintiffs must allege that pricing algorithms derive pricing recommendations from pooled information supplied by competitors but still likely made claims by future plaintiffs easier to sustain.