The Justice Department has filed an antitrust lawsuit against real estate company RealPage because it uses its technology to give landlords the ability to collude to increase rents.
U.S. Attorney General Merrick Garland announced the lawsuit at a press conference on Wednesday, saying RealPage’s illegal price-fixing practices resulted in rents being higher than if landlords set competitive prices.
The lawsuit for violation of the Sherman Act was filed on behalf of the Department of Justice and the attorneys general of California, Colorado, Connecticut, Minnesota, North Carolina, Oregon, Tennessee and Washington.
It’s about RealPage’s commercial revenue management software, which landlords use to set prices for apartments.
The lawsuit says RealPage contracts with participating landlords who share otherwise confidential information about things like rental rates and lease terms. The system then uses that information to train and run RealPage’s algorithmic pricing software, which creates price recommendations for participating landlords based on confidential information from them and their competitors, according to the Justice Department.
The lawsuit alleges that RealPage uses this process to allow landlords to coordinate on rental prices rather than compete with each other: “Americans should not have to pay more rent just because a company found a new way to negotiate with landlords and break the law,” Garland said. “We allege that RealPage’s pricing algorithm allows landlords to exchange confidential, competitively sensitive information and match their rents. The use of software as an exchange mechanism does not exempt this system from liability under the Sherman Act, and the Department of Justice will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them.”
The lawsuit also accuses RealPage of monopolizing the market: “RealPage has unlawfully maintained its monopoly on commercial revenue management software for multifamily properties in the United States, where RealPage has approximately 80% market share. Landlords agree to share their competitive data with RealPage in exchange for pricing recommendations and decisions that are the result of combining and analyzing competitors’ sensitive data. This creates a self-reinforcing feedback loop that strengthens RealPage’s influence in the market and makes it difficult for honest companies to compete on the basis of their merits.”
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The lawsuit alleges that RealPage’s practices harm millions of Americans by, among other things, teaching landlords to limit concessions such as “free months” on rent or price discounts.
“By feeding sensitive data into a sophisticated, artificial intelligence-based algorithm, RealPage has found a modern way to violate a centuries-old law through the systematic coordination of rental prices – thereby undermining competition and fairness for consumers,” said Assistant Attorney General Lisa Monaco.
“Training a machine to break the law is still breaking the law. Today’s action makes clear that we will use all of our legal tools to ensure that technology-enabled anti-competitive behavior is held accountable,” she said.
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