Justice Department claims RealPage software helped landlords collude over rents
The U.S. Department of Justice alleges that RealPage used technology to help landlords share information about leases, thereby keeping rent high for millions of tenants.
WASHINGTON — A lawyer for RealPage, a company sued by the Justice Department for allegedly helping landlords maintain high rents, argued Monday that the company is not harming competition and that quotes from executives in the lawsuit were “cherry-picked” and taken out of context.
In response, the department and eight state attorneys general filed a lawsuit in North Carolina federal court on Friday accusing RealPage of helping landlords share nonpublic information about rents, vacancies and concessions to keep rents higher.
But Stephen Weissman, an outside attorney for RealPage, argues that the information sharing is legal because the company aggregates rental data from numerous sources rather than displaying specific rental prices at competing properties.
The non-public rents that landlords actually charge are unlikely to contribute to price increases because they would never be higher than the tender rents and could even be lower, he said.
“The software does not lead to higher prices than would be the case in a competitive market,” says Weissman, a former deputy director of the Federal Trade Commission’s competition office.
The nature of the lawsuit the department has filed is complex and could result in lengthy litigation. RealPage is willing to talk about changing its software to more quickly address the government’s concerns, Weissman said.
“We want to comply with the law,” Weissman said. “We strongly believe in the legality of our product, but if there are solutions here that allow us to continue to innovate and be competitive in the market, we are open to those solutions.”
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What is RealPage accused of in the lawsuit?
The Justice Department and attorneys general from eight states filed suit Friday against RealPage, a company that provides landlords with software to manage 16 million rental units across the country, mostly in the Sun Belt and the South.
The federal lawsuit filed in North Carolina alleges that RealPage has a monopoly on so-called “revenue management software” for landlords because it controls 80% of the market nationwide. The lawsuit alleges that by sharing confidential information about rents, leases and vacancy rates, RealPage helps landlords collude to avoid competition and raise prices for millions of renters across the country.
Without RealPage’s information and recommendations on rents charged by competitors and available vacancies, landlords may charge higher prices or avoid concessions such as a rent-free month, the lawsuit says.
“Americans should not have to pay more rent just because a company found a new way to work with landlords and break the law,” Attorney General Merrick Garland said Friday.
States involved in the lawsuit are: California, Colorado, Connecticut, Minnesota, North Carolina, Oregon, Tennessee and Washington.
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RealPage claims Justice Department lawsuit cherry-picks executive quotes
Justice Department officials said this is the first civil case in which the government alleges that an algorithm was used as a method to allegedly violate federal law.
RealPage processes the information using algorithmic pricing software that generates recommendations for rental prices. The lawsuit cited examples of how RealPage and landlords allegedly used the information they shared.
A RealPage executive told a landlord that using competitor data could help identify where a landlord “may need to increase by $50 per day instead of $10,” the lawsuit says.
The lawsuit also quotes a landlord describing RealPage’s software. “I’ve always liked this product because your algorithm uses proprietary data from other subscribers to suggest rent and term,” the landlord said. “This is classic price fixing.”
“Training a machine to break the law is still a violation of the law,” Deputy Attorney General Lisa Monaco said Friday.
Weissman said quotes attributed to executives named in the lawsuit were taken out of context from millions of documents during the nearly two-year investigation.
One executive was quoted as saying, “A rising tide lifts all boats,” as if referring to rents. But Weissman said the comment referred to both occupancy and the amount of revenue generated.
“Many facts are misrepresented,” Weissman said of the lawsuit. “It cherry-picks statements and documents without context. I think most importantly, it omits important features of the software that make it legally compliant.”
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High housing costs are a major concern for U.S. consumers ahead of the presidential election in November. According to real estate service provider Zillow, home prices nationwide have risen by around 50 percent over the past five years and rents have risen by around 35 percent during that period.
The lawsuit is the Justice Department’s latest fight against corporate consolidation since President Joe Biden took office, which the government says limits consumer choice and drives up prices.
On Monday, the Federal Trade Commission began its federal case against the proposed merger of grocery chains Kroger and Albertsons. A federal court ruled on August 5 that Google illegally used its dominance as a search engine to monopolize online searches and thereby stifle competition. Other major lawsuits were filed in May against Live Nation Entertainment, the parent company of Ticketmaster, and in March against Apple.
Vice President Kamala Harris, the Democratic presidential candidate, recently announced a plan to combat high housing prices by building three million additional homes.
White House national economic adviser Lael Brainard declined to comment on the lawsuit but said the Biden administration has made it clear that “no one should pay higher prices because of corporate violations of the law.”
