Justice Department Accuses RealPage of Antitrust Violations to Raise Rents

The U.S. Justice Department recently initiated an antitrust lawsuit against RealPage Inc., a real estate software firm, alleging the company is involved in illegal practices that help landlords coordinate rent increases.

This lawsuit, filed in conjunction with attorneys general from various states including North Carolina and California, claims that RealPage is breaking antitrust laws via its algorithm that offers rental price recommendations to landlords.

According to officials from the Justice Department, this algorithm enables landlords to synchronize their pricing, thereby stifling competition that would typically drive rents lower. One executive from RealPage is quoted in the complaint suggesting that “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”

Attorney General Merrick Garland emphasized that “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” in a public statement.

In addition to the federal lawsuit, several state attorneys general have independently filed lawsuits against RealPage, accusing the company of being involved in an unlawful price-fixing arrangement through its algorithmic pricing software.

RealPage has responded to the allegations by asserting that the Justice Department’s claims lack validity and will not contribute to making housing more affordable.

The company expressed disappointment regarding the decision to pursue litigation, particularly after years of cooperation on antitrust issues. They criticized the lawsuit for attempting to vilify a technology that they claim has been responsibly utilized for years.

Using data to assist property managers in establishing rental prices is not an unusual practice and isn’t inherently illegal. However, state prosecutors assert that RealPage’s approach is distinct. Lawsuits filed by attorneys general in both Arizona and Washington, D.C., highlight that RealPage employs confidential information, shared voluntarily by its clients, to aid its software in pinpointing optimal pricing.

Prosecutors argue that this situation constitutes a form of illegal collusion akin to a cartel. Instead of traditional discussions among cartel members, the price coordination is conducted algorithmically through AI, they state.

The scrutiny directed at RealPage increased following a 2022 investigation by ProPublica, which raised concerns regarding the company’s business practices and their potential role in escalating housing costs. This scrutiny has led to dissatisfaction among Democratic lawmakers, including Senator Amy Klobuchar, who proposed a bill in February aimed at prohibiting the use of algorithms for colluding and setting prices.

Moreover, during a recent address in Raleigh, North Carolina, Democratic presidential nominee Vice President Kamala Harris vowed to address the issue of “corporate landlords (who) collude with each other to set artificially high rental prices (by) using algorithms and price-fixing software.”

This antitrust case reflects the Biden administration’s proactive approach towards enforcing antitrust regulations.

The Justice Department has also initiated legal action against companies like Apple and has taken significant steps against Ticketmaster and its parent company, Live Nation Entertainment. Furthermore, investigations have been launched into the involvement of tech giants such as Microsoft, Nvidia, and a few others in the expanding realm of artificial intelligence.

As the situation unfolds, it remains to be seen how these legal challenges will impact RealPage, landlords, and the broader housing market amid ongoing concerns regarding affordability and rental pricing.

Source: AP