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The United States today sued RealPage, alleging that the software maker distorts competition in the rental sector by helping landlords jointly fix prices.
“To ensure they receive the best value for their needs, renters rely on robust and vigorous competition among landlords. RealPage distorts that competition,” according to the lawsuit filed by the U.S. government and eight state attorneys general. In a press release, the Justice Department said “RealPage’s pricing algorithm violates the antitrust laws.”
Attorney General Merrick Garland explained the case. “When the Sherman Act was passed, antitrust laws may have looked like robber barons shaking hands in a secret meeting,” he said. “Today, they look like landlords using mathematical algorithms to match their rents. But antitrust laws don't just become obsolete because competitors find new ways to act together in an unlawful manner.”
RealPage's commercial revenue management software “makes it possible[s] landlords to circumvent fierce competition to win tenant business,” the lawsuit alleged. “Landlords, who would otherwise be competing with each other, submit their competitively sensitive information to RealPage on a daily basis. This nonpublic, material, and detailed rental data includes, among other things, a landlord's rents based on executed leases, lease terms, and future occupancy. RealPage collects a wide range of such data from competing landlords, combines it, and feeds it into an algorithm.”
Using that sensitive data, “RealPage returns daily, near real-time price recommendations to competing landlords,” the U.S. alleges. The U.S. claims that this is “more than just 'recommendations'” and that “RealPage monitors landlords' compliance with the recommendations.”
AG: Landlords “outsource their pricing decisions”
The U.S. has sought an injunction declaring “that RealPage has acted unlawfully by restraining trade in conventional multifamily rental housing markets in the United States.” The requested injunction would prohibit RealPage from continuing its alleged anticompetitive practices and would provide “necessary and appropriate relief to restore competitive conditions in the markets affected by RealPage's unlawful conduct.”
RealPage recently argued that its software “benefits both housing providers and residents” and “makes pricing recommendations in any direction — up, down or no change — to align with the specific goals of the housing providers using the software.” Landlords are not required to follow the recommendations, the company said.
The U.S. said RealPage plays a more direct role in setting prices. RealPage “reviews and weighs other landlord policies, including attempting — and often successfully — to eliminate tenant-friendly concessions (such as a free month's rent or waived fees) to attract or retain tenants,” the lawsuit said. Garland alleged that “a significant number of landlords effectively agree to outsource their pricing decisions to RealPage by using an 'auto-accept' setting, which allows RealPage to effectively set the price a tenant will pay.”
The RealPage algorithm “can serve as a mechanism for communication,” said Diana Moss, director of competition policy at the Progressive Policy Institute, a public policy think tank, according to The New York Times. “That's as approachable and actionable under U.S. antitrust law as any form of communication we've seen in previous cases in the non-digital age.”
The lawsuit was filed in the U.S. District Court for the Middle District of North Carolina. Six North Carolina landlords provided information to the Justice Department. The states that joined the lawsuit are North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington.
Software eliminates 'guessing game' of prices
Garland said the investigation leading up to the lawsuit lasted nearly two years. The lawsuit quoted landlords describing how they use RealPage:
One landlord noted that RealPage's software can “take the guesswork out” of landlords' pricing decisions. Another landlord said of another RealPage product, “I've always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and terms. That's classic price fixing.” A third landlord explained, “Our very first goal that we've had right from the beginning is that we're not going to be the reason that a particular submarket has a price drop. So our strategy has been to stand firm and keep an eye on the communities around us and our competitors.”
The lawsuit states that “RealPage frequently tells potential and current customers that a 'rising tide raises all ships.' A vice president of RealPage Revenue Management explained this phrase as meaning that 'it is better if everyone succeeds than if everyone just tries to compete with each other in a way that actually holds the industry back.'”
The U.S. and states allege that RealPage violated Section 1 of the Sherman Act by unlawfully sharing information for use in pricing competitors, and by entering into vertical agreements with landlords to coordinate pricing. RealPage is further accused of violating Section 2 of the Sherman Act by monopolizing the commercial revenue management software market.
RealPage, which also faces a ban on its software in San Francisco, said the lawsuit “has no merit and will do nothing to make housing more affordable.”
“We are disappointed that after years of education and cooperation on antitrust matters involving RealPage, the Department of Justice has chosen this moment to file a lawsuit seeking to blame the company for pro-competitive technology that has been used responsibly for years,” RealPage said.
The White House said in a statement that it had no comment on the lawsuit against RealPage, but that the Biden-Harris administration “continues to support fair and vigorous antitrust enforcement to prevent illegal collusion.”
