Summary
The Ninth Circuit affirmed the dismissal with prejudice of a putative antitrust class action against Cendyn Group, hotel operators, and related entities. The court held that plaintiffs failed to plausibly allege that individual licensing agreements for revenue-management software restrained competition in the market for Las Vegas Strip hotel-room rentals under Section 1 of the Sherman Act. The court did not address the dismissed hub-and-spoke claim because plaintiffs abandoned that portion of their appeal.
Topics
Practice areas
Questions Presented
- Whether plaintiffs plausibly alleged that individual licensing agreements between Cendyn and competing Las Vegas Strip hotels restrained trade in the relevant market under Section 1 of the Sherman Act.
- Whether the alleged collection of individual licensing agreements could be evaluated in the aggregate to establish a Section 1 violation.
- Whether the district court was required to apply the rule of reason before dismissing the complaint.
Holdings
- Plaintiffs failed to plausibly allege that the individual licensing agreements restrained trade in the market for hotel-room rentals on the Las Vegas Strip. The agreements did not affect the hotels' competitive incentives or restrain their ability to compete in that market.
- Plaintiffs could not convert the number of individual licensing agreements into an actionable aggregate restraint. Count 2 contained no factual allegation of a horizontal conspiracy among the hotels, and the challenged agreements did not individually restrain competition.
- The district court did not need to apply the rule of reason because plaintiffs failed at the threshold to allege a restraint of trade in the relevant market.
Key quotations
“Section 1 requires a causal link between the contested agreement and an anticompetitive restraint of trade in the relevant market.” (6)
“Nor does it require businesses to decline to take advantage of a service because its competitors already use that service.” (21)
“The statement that as a general matter a restraint of trade is analyzed under the rule of reason does not support the holding that every contract triggers scrutiny pursuant to the rule of reason—regardless whether the contract imposes a restraint of trade in the relevant market at all.” (26)
“To make out a Section 1 claim, Plaintiffs must allege a restraint of trade in the relevant market that causes an “actual adverse effect on competition.”” (29)
Factual background
Plaintiffs regularly rented hotel rooms on the Las Vegas Strip and alleged that they paid higher prices because competing hotels used Cendyn's revenue-management software. The hotels independently entered licensing agreements for Cendyn products that generated pricing recommendations using hotel data and, in some circumstances, competitor pricing information. Plaintiffs did not allege that Cendyn pooled or shared one hotel's confidential information with other hotel licensees, or that the hotels agreed among themselves to follow Cendyn's recommendations.
Procedural history
Plaintiffs alleged that Las Vegas Strip hotels violated Section 1 of the Sherman Act through agreements involving Cendyn's revenue-management software. The district court dismissed Count 1, which alleged a hub-and-spoke agreement among the hotels, and Count 2, which alleged that the aggregate of individual licensing agreements caused artificially inflated prices. On appeal, plaintiffs abandoned their challenge to dismissal of Count 1; the Ninth Circuit affirmed dismissal of Count 2 with prejudice.