Corporate Counsel Daily, Algorithmic pricing case asks Supreme Court to revive Sherman Act scrutiny, (Mar 25, 2026)

By George Basharis, J.D.

The petition challenges a Ninth Circuit ruling that software licensing agreements fall outside Sherman Act scrutiny absent compelled pricing.

A petition for a writ of certiorari now before the U.S. Supreme Court argues that modern pricing systems can suppress competition even without explicit commands and that antitrust law must account for how algorithmic defaults shape market behavior rather than focusing solely on formal contractual discretion. The filing arises from a challenge to the use of revenue-management software by major Las Vegas Strip hotels. It contends that the U.S. Court of Appeals for the Ninth Circuit adopted a categorical rule that improperly shields certain commercial agreements from scrutiny under Section 1 of the Sherman Act, particularly those involving algorithmic pricing tools that influence, but do not formally mandate, pricing decisions (Gibson v. Cendyn Group, LLC, Dkt. No. 25-1109 (U.S. March 11, 2026)).

The case arises from claims brought by consumers who purchased hotel rooms on the Las Vegas Strip, alleging that several major casino-hotels used a shared algorithmic pricing platform supplied by Cendyn Group, formerly known as Rainmaker. The software collects market data, including competitors’ pricing, and generates recommended room rates that can be automatically implemented through integration with hotel systems. The complaint asserts that widespread adoption of the platform led competing hotels to replace independent pricing decisions with a common algorithmic framework, resulting in higher room prices.

The software’s features include automated price uploads and controls on deviations through “override permissions,” which the filing characterizes as creating a functional pricing default rather than a purely advisory tool. Petitioners contend that this structure produced coordinated pricing effects without the need for a traditional horizontal agreement among competitors. Instead, each hotel entered into separate licensing agreements with the same vendor, which they allege served as the mechanism for aligning pricing behavior across the market.

The district court dismissed the complaint with prejudice, concluding that the plaintiffs failed to allege a “restraint of trade” because the software did not require hotels to follow its recommendations. The court emphasized that hotels retained discretion to reject suggested prices and that the complaint itself acknowledged instances in which recommendations were not adopted.

The Ninth Circuit affirmed, holding that agreements for pricing recommendations, without mandatory adherence, do not restrain trade in the relevant market and therefore fall outside Section 1 of the Sherman Act. The court characterized the contracts as ordinary commercial agreements that did not limit each hotel’s independent ability to set prices. It also rejected the plaintiffs’ attempt to aggregate separate licensing agreements into a single coordinated scheme after they abandoned a hub-and-spoke conspiracy theory on appeal.

The panel further reasoned that, absent a requirement to follow the software’s recommendations, the agreements did not plausibly alter competitive incentives or reduce independent decision-making in the market. In its view, the provision of pricing guidance, even if widely used, does not by itself establish a restraint of trade where each firm remains free to accept or reject those recommendations.

As a result, the courts did not reach the rule-of-reason analysis typically used to assess competitive effects under the Sherman Act, concluding instead that the alleged conduct fell outside the statute at the threshold stage.

Threshold antitrust rule challenged. The petition argues that the Ninth Circuit’s approach conflicts with longstanding Supreme Court precedent recognizing that nearly all commercial agreements restrain trade to some degree and must be evaluated based on their competitive effects. It contends that the lower courts improperly converted the concept of “restraint” into a threshold requirement that excludes agreements lacking explicit commands. Under that framework, agreements that influence conduct through defaults, incentives, or structural mechanisms would evade scrutiny.

The petition asserts that this reasoning cannot be reconciled with prior Supreme Court decisions, which emphasize that the Sherman Act targets unreasonable restraints rather than only those that compel specific outcomes. It further argues that the decision departs from precedent recognizing that agreements can restrain trade by shaping how competitors make decisions, even when they retain formal discretion.

The petition further asserts that the Ninth Circuit’s rule effectively allows firms to structure agreements to preserve nominal pricing discretion while still channeling competitive behavior through shared systems, thereby avoiding antitrust review at the outset. By treating the absence of express compulsion as dispositive, the decision, according to the filing, risks foreclosing inquiry into how such arrangements operate in practice, including whether they reduce independent decision-making or facilitate coordinated outcomes. It contends that this approach is particularly ill-suited to modern markets, where algorithmic tools and automated processes may influence pricing and other competitive variables through design features such as defaults, data inputs, and implementation mechanisms rather than explicit contractual mandates.

Algorithm-driven markets. The petition frames the issue as increasingly significant in markets where pricing and other competitive decisions are mediated by shared technological systems. It warns that a rule requiring express compulsion could allow firms to structure agreements in ways that preserve nominal independence while effectively coordinating behavior.

The United States, appearing as amicus in the court of appeals, similarly cautioned that joint use of pricing algorithms may produce anticompetitive effects even when the resulting prices are not binding. According to the government, the Ninth Circuit’s reasoning has already been cited in other litigation as a basis for avoiding antitrust scrutiny, raising concerns about its potential reach beyond the hospitality industry.

The petition also emphasizes that the decision could have implications for a wide range of industries that rely on centralized software platforms, data analytics tools, and automated decision-making systems to guide pricing and output. It contends that, under the Ninth Circuit’s framework, firms could adopt common tools that incorporate competitors’ data and generate uniform recommendations without triggering rule-of-reason analysis, so long as final decisions remain formally discretionary. The filing asserts that this dynamic risks narrowing Section 1’s reach at a time when algorithmic systems are increasingly used to structure competitive conduct, and that clarification from the Supreme Court is needed to ensure that antitrust analysis remains focused on how such arrangements function in practice rather than on whether they impose explicit contractual mandates.

Lack of coordination. In prior proceedings, defendants argued that the case does not present a suitable vehicle for addressing broader questions about algorithmic pricing. They emphasized that the complaint does not allege shared proprietary data, delegated pricing authority, or any horizontal agreement among competitors. They also maintained that the software provides only nonbinding recommendations and that hotels retain full control over pricing decisions, distinguishing the case from others involving coordinated conduct.

The defendants further argued that, once the plaintiffs abandoned their conspiracy theory, the remaining claims challenged only routine vertical contracts that do not independently harm competition and therefore fall outside Section 1. They contended that antitrust law requires a showing that each challenged agreement, viewed on its own, plausibly restrains trade in the relevant market, and that plaintiffs cannot rely on the cumulative effect of separate, non-collusive agreements to establish liability. According to the defendants, the complaint instead rests on allegations of parallel pricing and post-hoc price increases, which they assert are insufficient to state a claim absent factual allegations linking any individual agreement to a reduction in competitive decision-making.

Narrow legal question. The petition asserts that the case is a clean vehicle for resolving a discrete legal issue: whether agreements involving algorithmic pricing tools are categorically exempt from rule-of-reason analysis absent explicit pricing mandates. It emphasizes that the only remaining claim is a rule-of-reason challenge to written licensing agreements, with no overlapping theories of conspiracy or per se liability.

The petition concludes that Supreme Court review is warranted to clarify the proper framework for evaluating modern commercial arrangements that rely on algorithmic decision-making systems and to ensure that Section 1 remains capable of addressing evolving forms of coordination in competitive markets.

The Case is No. 25-1109.

Judge: NA.

Attorneys: Steve W. Berman (Hagens Berman Sobol Shapiro LLP) for Richard Gibson. Melissa Arbus Sherry (Latham & Watkins LLP) for Cendyn Group, LLC.

Companies: Cendyn Group, LLC

News: Antitrust GCNNews