US prosecutors on Friday filed comprehensive antitrust charges against a property management software company. The company is accused of using algorithms to facilitate collusion between landlords and thus harm tenants in numerous US markets.
The Department of Justice, along with eight U.S. states, has filed a civil lawsuit against Texas-based RealPage, which it alleges has a “monopoly” on commercial revenue management software, according to a DOJ press release.
RealPage said it would “vigorously” fight the lawsuit, which it described as baseless.
The lawsuit, filed in a U.S. court in North Carolina, alleges that RealPage’s algorithmic software uses real-time pricing information and forecasts vacancy rates and other confidential, nonpublic data from competing landlords. The software then generates pricing recommendations that allow landlords to charge higher prices than they otherwise would, thereby harming consumers.
The lawsuit will be the first time that U.S. prosecutors have targeted anti-competitive behavior related to computer algorithms, a U.S. Department of Justice official said.
Attorney General Merrick Garland called RealPage’s behavior “classic price-fixing” and called competition among landlords a crucial protection for tenants.
“Everyone knows the rent is damn high, and we argue that’s one of the reasons why,” Garland said at a press conference.
A RealPage spokeswoman called the lawsuit a “distraction” from the “fundamental” causes of rent inflation, which include a shortage of housing and high mortgage rates.
“We are disappointed that after many years of research 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,” RealPage said.
“We believe the Justice Department’s demands are unfounded and will do nothing to make housing more affordable.”
The lawsuit cites internal documents, including a RealPage executive’s comment that “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.”
Deputy Attorney General Jonathan Kanter praised the Justice Department’s hiring of data scientists for enabling the department to closely examine how technology can be used for questionable purposes in the rental and other markets.
“Algorithms process far more information and far faster than humans ever could,” Kanter said. “The technical capabilities of software can increase a competitor’s ability to make a profit, influence the market in favor of monopolies and undermine the competitive process.”
RealPage oversees companies that manage three million housing units and has a particularly strong presence in the Sunbelt and the South, U.S. Justice officials said during a press conference.
In the Raleigh, North Carolina, market, RealPage had a market share of about 40 percent, U.S. authorities said. In some markets, the company’s market penetration was as high as 60 percent, officials said.
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