First Appellate Ruling On Algorithmic Pricing: What The Ninth Circuit Said Versus What It Did

In Gibson v. Cendyn Group, the U.S. Court of Appeals for the Ninth Circuit became the first federal court of appeals to evaluate an antitrust claim based on algorithmic pricing. The plaintiffs-appellants brought suit under Section 1 of the Sherman Act, challenging agreements between the provider of algorithmic revenue-management software and the hotels that used that software's recommendations to price room rentals. The court affirmed dismissal of the complaint, concluding that the parties' relationship was neither horizontal nor vertical in the relevant sense and therefore their agreements were not subject to the rule of reason at all. Nevertheless, the court went on to apply what amounted to a "quick look approval" version of the rule of reason. The court suggested that its analysis might have been different if the complaint had alleged that the hotels had delegated pricing decisions to a third party or if the software had shared competitors' current,