Justice Dept. Sues Real Estate Firm for ‘Price-Fixing’ Software
WASHINGTON — The Justice Department sued a software company Friday that it says helps landlords engage in price fixing, driving up rents for tenants.
Algorithms used by the RealPage revenue management system assist in identifying tenants most susceptible to paying higher rents, according to the Justice Department’s complaint filed in federal court in North Carolina.
They also can block the kind of market competition most likely to moderate rent prices, the lawsuit says.
RealPage controls about 80% of the software packages used by property managers in the United States.
Justice Department officials said at a Washington, D.C., press conference Friday that RealPage serves as an example of pricing software whose algorithms could violate antitrust laws.
Other examples can be found in the food, hospitality and health care industries, they said.
Sen. Amy Klobuchar, D-Minn., introduced a bill this year to close what she described as a loophole in antitrust law created by the pricing software.
Current law requires an explicit agreement as proof of an antitrust violation. Klobuchar’s Preventing Algorithmic Collusion Act also would ban software that has the effect of price fixing, even without an agreement.
The antitrust lawsuit filed Friday cited one landlord who called RealPage’s use of proprietary data to recommend rents “classic price fixing.”
RealPage’s software allows competing landlords to share information about their rents and occupancy rates. Based on that information, the software recommends rent prices.
The result is that it allows property managers to collude in setting rates in what the Justice Department calls a violation of the Sherman Antitrust Act.
“To RealPage, the ‘greater good’ is served by ensuring that otherwise competing landlords rob Americans of the fruits of competition — lower rental prices, better leasing terms, more concessions,” the lawsuit says. “At the same time, the landlords enjoy the benefits of coordinated pricing among competitors.”
The lawsuit was joined by the attorneys general from California, Colorado, Connecticut, Minnesota, North Carolina, Oregon, Tennessee and Washington.
It was announced by U.S. Attorney General Merrick B. Garland.
He said price fixing by competing businesses might have become high tech but it does not change the illegal nature of antitrust violations.
A hundred years ago, “An anticompetitive scheme might have looked like robber barons shaking hands at a secret meeting,” Garland said. “Today, it looks like landlords using mathematical algorithms to align their rents.”
The RealPage software also checks to determine whether landlords follow its pricing recommendations. By agreeing to the recommendations, they effectively thwart free market pricing, the lawsuit says.
Texas-based RealPage has called the Justice Department allegations “false and misleading.” It said inflation, not software, is driving up rental rates.
The company pledged to fight the Justice Department lawsuit.
The Justice Department’s interest followed 2022 media reports about residential landlords using RealPage’s software.
The reports led to dozens of class action renter lawsuits nationwide against major real estate firms like Equity Residential, Greystar Real Estate Partners and Mid-America Apartment Communities Inc.
The case is U.S. v. RealPage Inc. in the U.S. District Court for the Middle District of North Carolina.
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