November 20, 2023
RealPage has denied the allegations from the federal lawsuits filed against it.
In 2022, a ProPublica investigation alleged that a Texas software provider, RealPage, was using an algorithm that recommended that landlords set rents to maximize profits, which experts cautioned could constitute a violation of antitrust laws. Now, it appears that the Department of Justice has found cause to pursue action against the company, as it filed an official statement of interest pertaining to the Sherman Act on Nov. 15, ProPublica reports.
The Sherman Act is the federal law governing antitrust law. The DOJ’s willingness to participate in a federal lawsuit against RealPage indicates an escalating interest in the case from the federal government. There are now federal suits against the company in several states, including California, Tennessee, and the District of Columbia.
According to ProPublica, the class action suit filed by a group of renters in San Diego reads: “Algorithms are the new frontier,” federal prosecutors said in a federal lawsuit. “And, given the amount of information an algorithm can access and digest, this new frontier poses an even greater anticompetitive threat than the last.”
RealPage has denied the allegations from the various federal lawsuits filed against it. A statement emailed to ProPublica said it “strongly denies the allegations and will vigorously defend against the lawsuit.”
ProPublica reported that in the tenant lawsuits against RealPage, it maintains that the company encouraged landlords to share data collectively to set price points. Prosecutors say it doesn’t matter whether or not the landlords communicated with each other; the result is still a price-fixing scheme.
The suit notes that using an algorithm to set prices does not automatically make such an arrangement illegal. Federal prosecutors note that it becomes an antitrust violation when competitors, here the landlords, combine private and sensitive prices and supply information to make pricing choices via an algorithm with the knowledge or expectation that others will engage in the same practice.
According to a federal lawsuit filed in the District of Columbia Superior Court, it is alleged that RealPage devised a system that pushed its employees to accept what its software spit out. A former RealPage executive involved with creating the software “expressed dismay with the way RealPage has enabled lessors to collectively raise rents at record pace.” The ex-executive also said in the lawsuit that the company’s practice of setting a price and then consistently raising it “bastardized” the company’s original intention for the software.
In Washington, D.C., according to the outlet, 90% of large apartment buildings, defined as those with 50 units or more, use RealPage’s software. As a result, the Attorney General of the District of Columbia, Brian Schwab, brought a suit against RealPage and 14 other large apartment landlords, saying that they are “colluding to illegally raise rents for tens of thousands of DC residents.”
Schwab’s suit also describes their alleged scheme as a cartel, saying, “Every dollar of increased rent that the cartel illegally squeezes from District renters contributes to widening wealth gaps, forces hardworking residents to forgo other uses of their money, and pushes residents out of a District whose housing they increasingly cannot afford.”
In October, Sen. Amy Klobuchar, the chair of a committee on antitrust policy, held a hearing that focused on competition and consumer rights. As part of the discussions, RealPage’s controversy emerged in testimony. Maurice Stucke, a former prosecutor in the Justice Department’s antitrust division and a University of Tennessee law professor, said during his testimony to the committee, “So one issue for you is can the antitrust laws effectively punish and deter this alleged anti-competitive behavior?” Stucke said.
“The short answer is yes, if humans agreed among themselves to fix price, and RealPage’s pricing algorithm was then used to facilitate their collusion.”
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