Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe Justice Department and attorneys general from eight states are suing a Texas-based software company accused of using complex algorithms to enable widespread collusion in rents by landlords.
In a lawsuit filed Friday in the Middle District of North Carolina, federal regulators accused RealPage of an unlawful scheme to decrease competition in apartment rentals and abusing monopoly power in its niche market for software that landlords use to price apartments.
Founded in 1998, RealPage Inc. is a multinational company that offers technology services to real estate owners and property managers, including revenue-management and rent-setting products. As of 2023, the company serves more than 24 million residential units.
The Justice Department’s complaint states that RealPage acknowledged that its software is aimed at maximizing profits for landlords and avoids competing on the merits of each apartment. The complaint points to situations where the software identified tenants who may be candidates for larger rent increases and cited one landlord who called RealPage’s product “classic price fixing” for its use of proprietary data.
“Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability, and the Justice Department will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them,” U.S. Attorney General Merrick Garland said.
The lawsuit is among the Justice Department’s first major enforcement actions in which software is being alleged as the primary means of collusion.
“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” Garland said in a statement.
The complaint alleges that RealPage works with competing landlords who agree to share sensitive rental data used to train the company’s pricing algorithms. The software makes recommendations on rent increases and other aspects of pricing.
RealPage was hit with a string of lawsuits starting in autumn 2022, after a ProPublica investigation revealed the influence of RealPage software in setting rental prices.
Multiple state and municipal prosecutors have sued RealPage, including District of Columbia Attorney General Brian Schwalb in November 2023 and Arizona Attorney General Kris Mayes in February.
“This action sends an important signal to the market that algorithms may play a critical role in facilitating illegal collusion,” said Gene Kimmelman, a former Justice Department antitrust official. “Courts must factor new technology into their assessment of illegal behavior.”
The Justice Department case is only filed against RealPage, not landlords, for collusion and illegal monopoly behavior. Some legal scholars have pushed back on this approach, which has been anticipated for months. Jay Ezrielev, founder of antitrust consulting firm Elevecon, has argued that such a legal case from prosecutors “represents a vast expansion of antitrust doctrine.”
“Under the DOJ’s legal theory, using the same vendor as competitors (without ever communicating with the competitors or reaching an agreement on prices) can by itself result in antitrust liability,” Ezrielev wrote in an essay this month.
California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington were also part of the suit.
Please enable JavaScript to view this content.