The Justice Department filed an antitrust lawsuit against real estate software company RealPage Inc. on Friday, accusing it of an illegal system that allows landlords to coordinate on raising rents.
The lawsuit, filed jointly with the attorneys general of states including North Carolina and California, accuses the company of violating antitrust laws with its algorithm that landlords use to determine recommended rental prices for apartments.
The algorithm allows landlords to match their prices and avoid competition that would otherwise keep rents down, Justice Department officials said. The lawsuit quotes a RealPage executive as saying, “It’s better for everyone to succeed than for us to try to essentially compete with each other in a way that keeps the entire industry down.”
In a statement, Attorney General Merrick Garland said: “Americans should not have to pay more rent just because a corporation found a new way to scheme with landlords and break the law.”
Attorneys general in several states have independently filed lawsuits against RealPage, accusing the company of an illegal price-fixing scheme related to its algorithmic pricing software.
In a statement, RealPage said the Justice Department’s demands were “unfounded 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.
Using data to help property managers set their rents isn’t new, and on its face, it’s illegal. But prosecutors argue RealPage is different. According to lawsuits filed last year by the attorneys general of Arizona and Washington, D.C., RealPage uses not only publicly available data — but also confidential data that RealPage’s customers share privately — to help RealPage’s software determine the highest price.
This would amount to illegal price-fixing like in a cartel, say the prosecutors. 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.
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 rise in housing costs. Since then, RealPage has drawn the ire of Democratic lawmakers, including Senator Amy Klobuchar, who introduced a bill in February to ban companies from using algorithms to collude and fix prices.
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.”
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.
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Rico reported from Atlanta.
