WASHINGTON (AP) — The Justice Department filed an antitrust lawsuit Friday against real estate software company RealPage Inc., accusing it of an illegal system that allows landlords to coordinate on rent increases.
The lawsuit, filed jointly with attorneys general in states including North Carolina and California, alleges the company violates antitrust laws with its algorithm that landlords use to determine recommended rental prices for apartments. Justice Department officials claim the algorithm allows landlords to match their prices and avoid competition that would otherwise keep rents low, Justice Department officials said.
“Americans should not have to pay more rent just because a corporation found a new way to conspire with landlords and break the law,” Attorney General Merrick Garland told reporters.
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In a statement, RealPage said the Justice Department’s demands were “baseless and would do nothing to make housing more affordable.”
“We are disappointed that after many years of investigation and cooperation on the antitrust issues surrounding RealPage, the Department of Justice is now bringing a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years,” the company said.
RealPage came under scrutiny after a 2022 ProPublica investigation into the company’s business practices suggested it may be responsible for some of the skyrocketing housing costs. Since then, RealPage has drawn the ire of Democratic lawmakers, including Senator Amy Klobuchar of Minnesota, who introduced a bill in February to ban companies from using algorithms to collude and fix prices. The company also faces several lawsuits from state attorneys general.
And last week, Democratic presidential candidate and Vice President Kamala Harris promised in a speech in Raleigh, North Carolina, to crack down on “corporate landlords who collude to set artificially high rents through the use of algorithms and price-fixing software.”
RealPage isn’t the only company offering an algorithmic tool to help property managers set pricing, but according to the lawsuit, the company is by far the largest in the industry, controlling 80 percent of the market.
Using data to help property managers set their rents is nothing new and, on its face, illegal. But authorities argue that RealPage is different.
According to lawsuits filed last year by the attorneys general for Arizona and Washington, D.C., RealPage uses not only publicly available data but also confidential data that RealPage’s customers have agreed to share in confidence to help RealPage’s software determine the highest price.
This would be tantamount to illegal price-fixing like in a cartel, say the authorities. Only this time the cartel members are not meeting in a proverbial “smoke-filled room” but the price-fixing is being carried out by an AI, they say.
The Justice Department points to RealPage executives’ own statements that their product maximizes rates for landlords. One executive said, “It’s better for everyone to be successful than for us to try to essentially compete with each other in a way that puts the entire industry under pressure.”
A landlord is quoted as saying about one of RealPage’s products: “I’ve always liked this product because your algorithm uses proprietary data from other subscribers to suggest rent and term. This is classic price fixing…”
RealPage has noted that landlords are free to reject the pricing recommendations generated by the software, but the Justice Department claims that doing so often requires a series of steps, including speaking with a RealPage pricing consultant, which can “discourage property managers from acting on emotion.”
“Tenants need to be able to negotiate rates with landlords without the risk of collusion to get a fair deal for everyone involved. But RealPage left out those ingredients, changed the locks and threw away the keys,” said Assistant Attorney General Lisa Monaco.
The case is the latest example of the Biden administration’s aggressive antitrust policies.
The Justice Department sued Apple in March and announced a full-blown lawsuit against Ticketmaster and its owner Live Nation Entertainment in May. Antitrust regulators have also launched investigations into the roles Microsoft, Nvidia and OpenAI played in the artificial intelligence boom.
Rico reported from Atlanta.
