Especially for the avant-garde
The Justice Department on Friday, along with the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington, filed a civil antitrust lawsuit against RealPage Inc. The plaintiff accuses the company of an illegal scheme to reduce competition among landlords in apartment pricing and to monopolize the market for commercial revenue management software that landlords use to price apartments.
“Anti-competitive agreements are illegal whether made by humans or a software program. RealPage misused private and sensitive consumer data to drive competition out of the rental industry, leaving renters with no choice but to pay the intentionally high prices set by landlords,” said Attorney General Bonta.
He added: “This means that even when the supply of rental housing was high, rental prices remained the same and in some cases even increased. This behavior is unacceptable and illegal, and given California’s current housing shortage and affordability crisis, it causes real harm. Every day, millions of Californians worry about whether they have a roof over their heads, and RealPage has directly made it harder to do so.”
RealPage’s alleged conduct, the Justice Department said Friday, deprives renters of the benefits of competition in apartment rental terms and harms millions of Americans. The lawsuit, filed today in U.S. District Court for the Middle District of North Carolina, alleges that RealPage violated Sections 1 and 2 of the Sherman Act.
The lawsuit alleges that RealPage enters into contracts with competing landlords who agree to share nonpublic, competitively sensitive information about their apartment rents and other lease terms with RealPage in order to train and operate RealPage’s algorithmic pricing software.
This software then generates recommendations based on competition-relevant information from the participating landlords and their competitors, including recommendations on apartment rental prices and other conditions.
The lawsuit further alleges that in a free market, these landlords would otherwise compete independently for tenants based on prices, discounts, concessions, lease terms and other aspects of apartment leasing.
RealPage also uses this system and its extensive data set to maintain its monopoly in the commercial revenue management software market. The complaint seeks to end RealPage’s illegal conduct and restore competition to the benefit of renters in states across the country.
Americans should not have to pay more rent just because a company found a new way to collude with landlords and break the law,” said Attorney General Merrick B. Garland. “We allege that RealPage’s pricing algorithm allows landlords to exchange confidential, competitively sensitive information and adjust 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.”
“Today’s complaint against RealPage illustrates our corporate rights enforcement strategy in action. We identify the most serious wrongdoers, whether individuals or companies, and focus all of our energy on holding them accountable,” said Assistant Attorney General Lisa Monaco. “By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has found a modern way to violate a centuries-old law by systematically coordinating rental prices — and undermining competition and fairness for consumers in the process. 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 accountability for technology-enabled anticompetitive behavior.”
“RealPage’s egregious, anti-competitive conduct allows landlords to undermine fair pricing and limit housing choices while stifling necessary competition,” said Assistant Attorney General Benjamin C. Mizer. “The Department remains committed to rooting out illegal schemes and practices designed to advance corporate interests at the expense of consumers.”
“As Americans struggle to afford housing, RealPage is making it easier for landlords to coordinate and raise rents,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “Today, we filed an antitrust lawsuit against RealPage to make housing more affordable for millions of people across the country. Competition – not RealPage – should determine what Americans pay to rent their homes.”
Over the past four decades, housing demand in California has far outpaced housing production. Housing costs have skyrocketed, making it harder for Californians to keep a roof over their heads. California’s 17 million renters spend a significant portion of their paychecks on rent, and an estimated 700,000 Californians are at risk of eviction.
The lawsuit, filed Friday, accuses RealPage of violating Sections 1 and 2 of the Sherman Antitrust Act, which prohibits anticompetitive agreements, monopolization and attempts to monopolize.
The complaint cites internal documents and sworn statements from RealPage and commercial landlords that make clear that the goal of RealPage and the landlords is to maximize rental rates and profitability at the expense of tenants. For example:
- RealPage acknowledged that its software aims to maximize prices for landlords. The company described its products as “taking advantage of price increase opportunities,” “avoiding the race to the bottom in declining markets” and “a rising tide lifts all ships.”
- A RealPage executive noted that the company’s products help landlords avoid competing on merit, adding, “It’s better for everyone to be successful than for us to try to basically compete with each other in a way that puts the whole industry under pressure.”
- A RealPage executive explained to a landlord that using competitor data could help identify situations where the landlord “may need to increase by $50 per day instead of $10.”
- Another landlord commented on RealPage’s product: “I’ve always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and terms. This is classic price fixing…”
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AG Rob Bonta DOJ Merrick Garland RealPage Tenant
