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Travelpass Group LLC v. Caesars Entertainment Corp.

United States District Court, E.D. Texas, Texarkana Division

September 27, 2019

TRAVELPASS GROUP LLC, PARTNER FUSION INC, RESERVATION COUNTER LLC, Plaintiffs,
v.
CAESARS ENTERTAINMENT CORPORATION, CHOICE HOTELS INTERNATIONAL INC, HILTON DOMESTIC OPERATING COMPANY INC., MARRIOTT INTERNATIONAL INC, RED ROOF INNS INC, SIX CONTINENTS HOTELS INC, WYNDHAM HOTEL GROUP LLC, HYATT CORPORATION, Defendants.

          ORDER

          ROBERT W. SCHROEDER, III UNITED STATES DISTRICT JUDGE

         The above-entitled and numbered civil action was referred to United States Magistrate Judge Caroline M. Craven pursuant to 28 U.S.C. § 636. On August 29, 2019, the Magistrate Judge issued a Report and Recommendation (Docket No. 183) (“R&R”), recommending the following motions be denied:

Joint Motion to Dismiss on Behalf of Defendants Hilton Domestic Operating Company Inc., Hyatt Hotels Corporation, Marriott International, Inc., Red Roof Inns, Inc., Six Continents Hotels, Inc. and Wyndham Hotel Group, LLC (Docket No. 53);
Defendant Caesars Entertainment Corporation’s Motion to Dismiss for Failure to State a Claim (Docket No. 55) and supplement thereto (Docket No. 159) and
Defendant Choice Hotels International, Inc.’s Motion to Dismiss for Failure to State a Claim (Docket No. 56).

         Only Caesars Entertainment Corporation filed objections to the R&R’s findings regarding its individual motion to dismiss. Docket No. 187. Plaintiffs responded to Caesars’ objections. Docket No. 190. The Court conducts a de novo review of only the objected to portions of the Magistrate Judge’s findings and conclusions. 28 U.S.C. § 636(b)(1)(C).

         BACKGROUND

         Plaintiffs are downstream online travel agencies (“OTAs”) that sell hotel rooms from different chains to consumers in the United States. Docket No. 1 ¶ 45. According to Plaintiffs, there are two types of OTAs: (1) Gatekeeper OTAs, including Expedia and Priceline, that maintain direct relationships with major hotel chains to market hotel inventory online and (2) Downstream OTAs, like Plaintiffs, that have affiliate agreements with Gatekeeper OTAs for access to hotel inventory. Id. ¶ 46. Plaintiffs’ business model includes bidding on branded keyword search results to attract hotel consumers to the hotel inventory on its websites. Id. ¶ 48.

         To use branded keyword advertising, Plaintiffs and other advertisers bid with search engines, like Google, to place their ads at the top of a search engine’s results page when certain keywords are searched. Id. ¶ 5. Higher bids receive better placement. Id. Historically, according to Plaintiffs, an individual searching for a particular hotel chain would see results for that brand, competing hotel brands, Gatekeeper OTAs and Downstream OTAs, all of which submitted high bids on that keyword. Id. ¶¶ 6, 67.

         Plaintiffs filed this antitrust case against several hotel chains: (1) Caesars Entertainment Corporation (“Caesars”); (2) Choice Hotels International, Inc.; (3) Hilton Domestic Operating Company, Inc.; (4) Hyatt Corporation; (5) Marriott International, Inc.; (6) Red Roof Inns, Inc.; (7) Six Continents Hotels, Inc. and (8) Wyndham Hotel Group, LLC. Id. Plaintiffs allege these hotel chains and others conspired to eliminate interbrand competition on keyword searches. Id. ¶ 1. Specifically, Plaintiffs assert that the defendants conspired horizontally with each other not to engage in branded keyword advertising for a competitors’ search term. Id. Plaintiffs also argue “the Defendant Hotels implemented a series of additional, or secondary, horizontal conspiracies under which Gatekeeper OTAs (1) agreed to stop bidding on branded search keywords and (2) also agreed to force Downstream OTAs to follow suit.” Id. ¶ 9. According to Plaintiffs, the Gatekeeper OTAs, at the instruction of the defendant hotels, removed the Downstream OTAs access to hotel inventory if the Downstream OTAs did not stop branded keyword search advertising. Id. ¶ 149. Plaintiffs allege these conspiracies harmed consumers as well as Plaintiffs’ business. Id. ¶ 152; see also Id . ¶¶ 151, 157, 160, 162–63.

         Plaintiffs asserted the following claims against all defendants: (1) a violation of the Sherman Act, 15 U.S.C. § 1 (per se bid rigging/group boycott/market division); (2) a violation of the Sherman Act, 15 U.S.C. § 1 (unreasonable restraint of trade); (3) a violation of related Utah Antitrust Act § 1 and (4) tortious interference with prospective business relations. Id. ¶ 164–94. Caesars moved to dismiss under Federal Rule of Civil Procedure 12(B)(6), arguing Plaintiffs failed to include specific factual allegations that Caesars engaged in an antitrust conspiracy.[1] Docket No. 55. According to Caesars, Plaintiffs alleged only that Caesars joined an industry group with other hotel defendants and that Plaintiffs received word from a Gatekeeper OTA that Caesars was cutting off Plaintiffs’ access to Caesars’ room list. Id. at 5. Caesars asserts Plaintiffs failed to point to any agreement between itself and any other horizontal competitor to deny access to its hotel rooms. Id. at 8. Caesars argues that Plaintiffs were required to plead some factual allegation sufficient to show a conspiracy between it and the other horizontal competitors, and the facts included in the Complaint fail to rise to the pleading standards mandated in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).

         REPORT AND RECOMMENDATION

         The Magistrate Judge, in her R&R, found that Plaintiffs allege sufficient facts to state a plausible claim for antitrust conspiracy against all the defendants collectively. See R&R at 79. Regarding Caesars’ motion to dismiss, the Magistrate Judge viewed the facts in the light most favorable to Plaintiffs and concluded that Plaintiffs sufficiently state an antitrust conspiracy claim against Caesars at this stage of ...


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