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The U.S. Department of Justice is accusing a real estate software company owned by private equity firm Thoma Bravo of allowing landlords to use algorithms to collude and maintain high rents, a move that is part of a crackdown on cutting-edge technologies that allegedly enable price fixing.
The Justice Department’s civil antitrust lawsuit against RealPage, filed in North Carolina, alleges that competing landlords agreed to share nonpublic and competitively sensitive information about their rental prices with RealPage, which was then used to train and operate the company’s algorithmic pricing software.
The software then recommended what rent landlords should charge based on the price information of their competitors, according to the Justice Department. This means that landlords no longer need to advertise for tenants on their own with discounts and concessions, it said.
RealPage’s pricing software affected about 3 million rental apartments, the complaint said.
“Americans should not have to pay more rent just because a company found a new way to negotiate with landlords and break the law,” said U.S. Attorney General Merrick Garland.
“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and adjust their rents,” Garland said. Using the software to share the information does not make the company immune from U.S. antitrust law, he added.
Thoma Bravo bought Texas-based RealPage in 2020 for $10.2 billion, making it one of the year’s largest leveraged buyouts. The company provides online services for property owners, such as marketing apartments and online billing, and uses an algorithm to screen potential renters using data on factors such as rent payment history, criminal records and credit scores.
RealPage expressed disappointment that after many years of investigation and cooperation on the antitrust issues surrounding RealPage, the Department of Justice has chosen this as the right time to file a lawsuit seeking to scapegoat pro-competitive technologies.
The newspaper added that it believed the lawsuit was “just a distraction from the fundamental economic and political issues that are driving inflation throughout our economy – and particularly housing affordability – and that should be the focus of policymakers in Washington.” Thoma Bravo declined to comment.
U.S. antitrust regulators have previously signaled their intention to crack down on the use of algorithms that can lead to higher prices or other anticompetitive effects. “Your algorithm can’t do anything that would be illegal if done by a real person,” the Federal Trade Commission said in a blog post in March.
A Justice Department official said the agency had “brought in outstanding data scientists and technologists” and would “thoroughly examine the code.”
U.S. Department of Justice officials said that while the algorithm aspect of the case was “powerful and interesting,” “the end result in terms of damages and impact… is typical antitrust at its core.”
The Justice Department brought the case jointly with the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon and Tennessee.
Additional reporting by Eric Platt
