Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Luxury hotel chains escape room rate conspiracy claims, (Apr 1, 2025)

By Jody Coultas, J.D.

The hotel consumer was unable to clearly express how exactly the hotels’ sharing of room rate information through a software platform let to anticompetitive pricing.

A consumer was unable to state a Sherman Act claim against eight luxury hotel chains and software company Amadeus IT Group, S.A., according to the federal district court in Chicago. The consumer alleged that Amadeus’ software allowed the hotels to exchanging proprietary, non-public, present and forward-looking demand data, which enabled the hotels to charge increased rates despite historically low overall demand. While the court noted that information sharing can be an appropriate basis for a conspiracy case, the consumer in this case failed to properly allege the anticompetitive effects caused by the alleged information-sharing. The court granted the consumer a third chance to amend the complaint to state a valid claim (Segal v. Amadeus IT Group, S.A., No. 1:24-cv-01783 (N.D. Ill. Mar. 31, 2025)).

Demand360 is a software program owned by Amadeus that provides hotels with real-time future demand data via advance booking data supplied by participating hotels. To participate, each hotel chain “must share twelve months of their own forward-looking occupancy data to the Demand360 platform either via each individual hotel's property management system, or through a centralized data warehouse.” In return, the chain receives the opportunity to “select a set of four or more competitor hotels that are located in the same or similar geographic market.” Each Demand360 user has access to “twelve months of aggregated, forward-looking demand data from those competitor properties,” and, due to the give-to-get requirement, participating competitors have access to the same information.

For the first time in 2020, the average daily rate (ADR) for hotel rooms began increasing independently of hotel occupancy rates. Even as occupancy rates fell during the COVID-19 pandemic, the average price of a luxury hotel room continued to increase. Luxury hotel revenue also increased during the class period, despite decreased occupancy rates. The consumer alleged that prior to adopting the Demand360 software, luxury hotel operators had incentives to maximize occupancy rates and to lower their rents to fill vacant rooms. However, using Demand360, the hotels allegedly engaged in a conspiracy to exchange sensitive information, restricting and/or eliminating price competition for luxury hotel rooms and fixing, stabilizing, or raising luxury hotel room prices to artificially inflated levels.

A traditional hub-and-spoke conspiracy has three elements: (1) a hub, such as a dominant purchaser; (2) spokes, such as competing manufacturers or distributors that enter into vertical agreements with the hub; and (3) the rim, which consists of horizontal agreements among the spokes. To plead a hub-and-spoke conspiracy, the plaintiff must allege that there was a central coordinating party (the hub), that each participant recognized that it was part of the greater arrangement, and that the defendants coordinated or otherwise carried out its duties as part of the broader group.

The consumer disclaimed reliance on a hub-and-spoke conspiracy theory, and the court agreed that the complaint failed to allege a plausible hub-and-spoke conspiracy because there was no allegations that the hotel defendants, the “spokes,” made agreements with one another sufficient to form a “rim.”

The consumer argued that the Sherman Act claim was sufficient based on the sharing of non-public information, claiming that the alleged information-sharing is itself illegal. In the case relied on by the consumer, the defendants allegedly shared compensation information with the effect that salaries for the plaintiff class were kept depressed, eliminating any incentive for the defendants to bid up salaries to compete to hire class members. Here, the consumer did not allege that by sharing occupancy information, the hotels conspired to stabilize or otherwise anticompetitively effect occupancy rates. The claim is that the hotels used occupancy data to affect pricing, which the court found to be “a somewhat attenuated connection compared to the cases on which he relies.” While information sharing can be an appropriate basis for a Sherman Act conspiracy case, the court found the consumer had alleged two contradictory theories of why he claims that the information-sharing he alleges led to anticompetitive effects. Without a claim that the information-sharing led to anticompetitive pricing, the court could not be clear as to what the consumer was alleging and what pleading standards should apply.

The Case is No. 1:24-cv-01783.

Judge: Gottschall, J.

Attorneys: Geoffrey Holmes Kozen (Robins Kaplan LLP) for Ryan Segal.

Companies: Amadeus IT Group, S.A.

Cases: Antitrust IllinoisNews