DOJ Claims RealPage and Landlords Colluded to Increase Rent by Millions

WASHINGTON − The Justice Department, alongside attorneys general from eight states, has filed a lawsuit against a Dallas-based company, RealPage, claiming that it gathered sensitive data from landlords across the nation. This information, they allege, has facilitated collusion among landlords, allowing them to raise prices for millions of renters.

RealPage offers software aimed at helping landlords manage around 16 million rental units across the country, primarily situated in the Sun Belt and Southern regions. The federal lawsuit, submitted in North Carolina, maintains that RealPage holds a dominant position in the “revenue management software” sector, controlling a significant 80% of the market.

According to the lawsuit, RealPage’s sharing of crucial data from landlords—including information on rental prices, leases, and vacancy rates—enables these landlords to collaborate in avoiding competition, leading to inflated prices. The document asserts that without RealPage’s insights and suggestions regarding competitors’ rents and available vacancies, landlords would be less likely to set their prices higher or to refrain from offering incentives, such as waiving the first month’s rent.

“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,” stated Attorney General Merrick Garland.

RealPage has not provided an immediate response to requests for comments regarding the lawsuit.

The software employed by RealPage utilizes algorithmic pricing techniques to generate recommendations for setting rental prices. The lawsuit details instances in which RealPage and landlords purportedly misused the shared data.

In one instance, a RealPage executive advised a landlord that competitor data could reveal opportunities for larger rental increases, suggesting a potential rise of $50 instead of a mere $10 for a given day. Similarly, a landlord was quoted in the lawsuit expressing approval of RealPage’s services, emphasizing that the company’s algorithm incorporates proprietary data from other users to propose rental prices and terms. The landlord remarked, “That’s classic price fixing.”

“The impact of the conduct is extensive,” asserted Assistant Attorney General Jonathan Kanter, who heads the department’s antitrust division. “As Americans struggle to afford housing, RealPage is enabling landlords to coordinate in moving rents upward.”

Garland emphasized that housing expenses comprise the largest monthly financial burden for many Americans, claiming that the alleged collusion between RealPage and landlords is a significant factor in maintaining unreasonably high prices. “Everybody knows the rent is too damn high, and we allege this is one of the reasons why,” he commented.

This lawsuit represents the first civil case where the government asserts that an algorithm has been utilized to allegedly breach federal law. Officials at the Justice Department explained that extensive investigations involving data scientists and researchers were completed over nearly two years, leading to this lawsuit.

“By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has discovered a modern method to violate a century-old law, coordinating rental prices and undermining competition and fairness for consumers,” addressed Deputy Attorney General Lisa Monaco. She concluded, “Training a machine to break the law is still breaking the law.”

The states joining in the lawsuit include California, Colorado, Connecticut, Minnesota, North Carolina, Oregon, Tennessee, and Washington.

This lawsuit is part of a broader initiative by the Biden administration’s Justice Department to combat corporate consolidation that diminishes choices for consumers and subsequently drives up prices. Since taking office, President Joe Biden’s administration has actively pursued legal actions against companies believed to have monopolized their respective markets.

In a notable case from August 5, a federal court ruled that Google misused its dominance in search engine services to suppress competition. The department also filed a lawsuit against Live Nation Entertainment—which owns Ticketmaster—in May, alleging monopolistic practices in the live-event sector, aiming to lower ticket prices for fans and promote greater opportunities for artists. Furthermore, in March, Apple faced legal action on accusations of monopolizing the smartphone market, potentially restricting consumer choice and innovation.

Recently, Vice President Kamala Harris unveiled a strategy intended to alleviate high housing costs, proposing the construction of 3 million new homes.

Source: USA TODAY