Justice Department Charges RealPage with Antitrust Violations in Rent Scheme

In a significant move against the rising costs of housing, the Justice Department has initiated an antitrust lawsuit against RealPage Inc., a real estate software firm. The lawsuit asserts that the company is involved in an illegal arrangement enabling landlords to collaborate in raising rental prices.

The allegations, which are supported by several state attorneys general, including those from North Carolina and California, claim that RealPage is breaching antitrust laws through its pricing algorithm. This software provides landlords with suggested rental prices, which reportedly allows them to coordinate their pricing strategies and eliminate competition that might keep rents lower.

Justice Department officials have highlighted concerns regarding the algorithm’s function, which they argue permits landlords to synchronize their prices. A quoted remark from a RealPage executive indicates a corporate philosophy that overlooks competitive practices in favor of collective profits. The executive expressed a belief that it is better for everyone to succeed together rather than engage in competition that could potentially hinder the industry.

Attorney General Merrick Garland commented on the situation, emphasizing that no American should face higher rents due to what he characterized as a scheme allowing RealPage to break the law alongside landlords.

The legal actions are not isolated. Attorneys general from multiple states have also filed lawsuits against RealPage, claiming the company is engaging in an unlawful pricing scheme through its software.

In response, RealPage has issued statements asserting that the claims put forth by the Justice Department lack validity and will not contribute to making housing more affordable. The company expressed disappointment, noting that they have engaged with the DOJ for years, providing education and cooperation regarding antitrust matters.

RealPage’s defense emphasizes that utilizing data for rental pricing is not an inherently illegal practice. However, state prosecutors contend that the situation with RealPage differs from traditional use of data. According to lawsuits filed by attorneys general from Arizona and Washington D.C., the company’s software relies on confidential data shared by clients, which facilitates the determination of inflated rental prices.

This practice is described as a form of illegal price-fixing, somewhat akin to cartel behavior. Prosecutors argue that rather than meeting in secretive settings, the coordination of prices is now accomplished through artificial intelligence.

The scrutiny on RealPage intensified following a 2022 investigation by ProPublica, which suggested a connection between the company’s practices and the rapid escalation of housing costs across the nation. This investigation has led to increased criticism from several Democratic lawmakers, including Senator Amy Klobuchar, who proposed legislation aimed at preventing companies from employing algorithms to manipulate prices collusively.

Additionally, during a recent speech in Raleigh, North Carolina, Vice President Kamala Harris, a candidate for the Democratic presidential nomination, highlighted the issue. She pledged to address the actions of corporate landlords who allegedly collude to establish unreasonably high rental prices through the use of algorithms and price-fixing software.

This lawsuit against RealPage is emblematic of the Biden administration’s firm stance on antitrust enforcement, marking it as one of several actions taken against major corporations. Earlier this year, the Justice Department pursued legal action against Apple, and in May, a comprehensive lawsuit was filed against Ticketmaster and its parent company, Live Nation Entertainment. Investigations were also launched into the roles of other tech giants, including Microsoft, Nvidia, and OpenAI as part of the intensified scrutiny of the burgeoning artificial intelligence sector.

As housing costs continue to be a pressing issue, the developments surrounding RealPage may have broader implications for both the housing market and the practices of tech companies involved in real estate.

Source: AP News