On Friday, the U.S. Department of Justice and eight states filed a landmark civil antitrust lawsuit against software company RealPage, accusing the company of illegal practices that undermine competition among landlords and drive up rent prices for millions of tenants.
The lawsuit, filed in U.S. District Court in North Carolina, accuses RealPage of using its algorithmic tools to manipulate market forces in a way that is detrimental to tenants and fair market competition.
The Justice Department’s lawsuit describes RealPage as an “algorithmic intermediary” that collects and exploits landlords’ competitive information. The lawsuit alleges that RealPage’s practices have allowed landlords to coordinate their pricing strategies, effectively stifling competition and leading to higher rental costs for tenants.
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“RealPage enables landlords to manipulate, distort and undermine market forces,” the lawsuit says. “In doing so, it enriches itself and compliant landlords at the expense of tenants who pay excessive prices and honest businesses that would otherwise compete.”
During a press conference on Friday, Attorney General Merrick Garland underscored the seriousness of the allegations: “Everyone knows that the rent is damn high, and we argue that’s one of the reasons why.”
He said the lawsuit represents an important step in the fight against new, technology-enabled methods of anti-competitive behavior.
With this lawsuit, the US government is for the first time accusing a company of systematically using algorithms to undermine the free market. Garland pointed out that antitrust laws remain relevant even if companies develop new methods to collude illegally.
“Antitrust law won’t become obsolete just because competitors find new ways to work together to break the law,” Garland said. “And Americans shouldn’t have to pay more rent just because a company found a new way to conspire with landlords to break the law.”
The Justice Department is joined in this litigation by the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington. Their joint action underscores widespread concerns about the impact of RealPage’s alleged practices on housing affordability in various states.
RealPage’s response
RealPage, owned by private equity firm Thoma Bravo, has said it will defend itself against the allegations. The company dismissed the suit as a “distraction” from larger economic problems that are driving inflation and called the lawsuit an attempt to scapegoat its technology.
“We are disappointed that after many years of investigation 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 in a statement on X (formerly Twitter).
The company emphasized that its revenue management software complies with legal standards and that it has been working with the U.S. Department of Justice for some time.
The lawsuit and the Biden administration’s push to reduce housing costs
The timing of the lawsuit is notable: It comes in the middle of a US presidential election campaign in which housing affordability has become a critical issue. Democratic presidential candidate Kamala Harris recently unveiled an economic plan to reduce rental costs that includes measures to combat collusion between landlords facilitated by price-fixing tools.
The White House declined to comment directly on the Justice Department’s lawsuit, but released a statement from national economic adviser Lael Brainard. Brainard reiterated the administration’s commitment to tackling high rents, saying, “President Joe Biden and Vice President Harris know that too many Americans feel squeezed by high rents.”
She stressed that the government supports vigorous enforcement of antitrust laws to prevent illegal collusion and ensure fair market practices.
President Joe Biden has stressed the urgent need to address rising housing costs in the United States and called for significant investments to address the severe shortage of affordable housing that has been growing for more than a decade and is said to have been exacerbated by the previous administration’s inaction.
Earlier this year, Biden urged Republicans in Congress to break the legislative deadlock and pass measures to lower housing costs. His proposals include a $10,000 tax credit for first-time buyers and those selling their first home, the construction and renovation of over 2 million homes, and efforts to lower rental costs.
In addition to these proposals, Biden announced new steps to make buying and refinancing homes more accessible by lowering closing costs and cracking down on corporate practices that exploit renters.
Earlier this month, the White House unveiled a series of new initiatives designed to encourage the construction of affordable housing and alleviate the affordability crisis affecting both renters and buyers. These measures include $100 million in community grants. These funds are designed to help communities identify and remove barriers to creating and preserving affordable housing.
With housing affordability a central issue in current political discourse, the U.S. Department of Justice’s lawsuit against RealPage represents an important measure in support of the Biden administration’s affordable housing efforts.
