As federal agencies and courts increase their focus on applying antitrust laws to evolving technologies, the U.S. Department of Justice filed an antitrust lawsuit Friday accusing RealPage Inc., a property management software company, of helping private landlords set rent prices through RealPage’s software. This is the first time the government has sued a company for systematically undermining free market competition by using mathematical algorithms, although the proposed Preventing Algorithmic Collusion Act summarizes: Here would specifically address the application of competition law to such conduct.
The current lawsuit by the Department of Justice, joined by eight states, is filed in the U.S. District Court for the Middle District of North Carolina and asserts claims under Sections 1 and 2 of the Sherman Act. Specifically: Complaint alleges that competing landlords share competitively sensitive information about their apartment rents and other lease terms to train and run RealPage’s pricing software. The software then generates recommendations on apartment rents and other terms. In this way, the DOJ says, the building owners can collaborate on their pricing decisions. This harms consumers through higher rents, worse lease terms, and fewer concessions, the DOJ says. At the same time, landlords reap the benefits of coordinated pricing among competitors. The DOJ also alleges that RealPage uses this system to maintain a monopoly in the market for commercial revenue management software that landlords use to price apartments.
This is not the first challenge to RealPage’s activities, as the company has already faced private litigation and actions by local law enforcement agencies in DC and Arizona.(1) In fact, the Department of Justice has Declaration of interests in a class action lawsuit filed in federal court in Tennessee last year, in which he declared that Section 1 of the Sherman Act, which prohibits competitors from fixing prices, applies with “full force” to systems using pricing algorithms. Likewise, as summarized in our earlier article, Insight ArticleDOJ and the Federal Trade Commission submitted an expression of interest in March 2024 in Duffy v. Yardi Systems Inc., et al.(2) arguing that the sharing of Yardi’s pricing algorithm by the landlords could constitute price fixing. According to the US Department of Justice, it should be legally irrelevant whether the companies agree on prices through a software algorithm or through interpersonal interaction.(3)
Similar allegations of algorithmic price-fixing are being brought in federal courts across the country in various industries, including hospitality, health insurance, and real estate. The need for judicial decisions in this area is paramount.
Can an agreement be assumed if customers know that competitors are using the same software? Will it be outcome-determining whether customers’ data is used to train and develop the algorithmic tool? At what point, if at all, does liability arise when the customer makes decisions that go beyond the results of the algorithmic tool? How can a rule developed here be reconciled with existing conspiracy case law that covers conspiracy agreements both inside and outside of antitrust law?
These cases, especially the most recent one, should be closely monitored by companies that use or are considering using algorithmic tools.
(1) See Arizona Attorney General press release and complaint (Feb. 2024) at https://www.azag.gov/press-release/attorney-general-mayes-sues-realpage-and-residential-landlords-illegal-price-fixing; DC Attorney General complaint (Nov. 2023) at https://oag.dc.gov/sites/default/files/2023-11/DC%20OAG%20RealPage%20Complaint%20-%20Filed.pdf
(2) Case No. 2:23-cv-01391-RSL.
(3) Department of Justice, United States Declaration of Interest, In re: RealPage, Rental Software Antitrust Litigation, Case No. 3:23-MD-3071 (Nov. 2023), available at https://www.justice.gov/d9/2023-11/418053.pdf
