DOJ: RealPage Pricing Algorithms Run Afoul Of Antitrust Laws, Sherman Act
The Department of Justice delivered a boost to renters who allege real estate rental software company RealPage and the landlords who use it engaged in price-fixing.
In a filing Wednesday, attorneys for the department argued against dismissing an antitrust case against RealPage — something the company and other defendants, including many large REITs, had requested.
In its filing, the DOJ outlines the ways it says the RealPage algorithm is a high-tech spin on the age-old concept of price collusion.
“Antitrust law does not become obsolete simply because conspirators find new ways to act in concert,” the department’s filing says.
By outsourcing the decision-making on rent prices to a shared source, RealPage and its users were in violation of the Sherman Act, the federal law that prohibits monopolistic business practices such as price-fixing, the DOJ argued.
The plaintiffs claim that RealPage requires users to put in detailed information about their properties, including rents and vacancy, and uses that information to suggest pricing, which it then urges users to implement. Landlords using RealPage adopt its pricing recommendations 80% to 90% of the time, the filing says.
RealPage declined to comment when reached by Bisnow via email Thursday.
Not every use of an algorithm to set price is necessarily against the law, but it is “when, as alleged here, competitors knowingly combine their sensitive, nonpublic pricing and supply information in an algorithm that they rely upon in making pricing decisions, with the knowledge and expectation that other competitors will do the same,” the filing’s authors wrote.
It isn't unusual for the Justice Department to get involved in a case in this way, but it indicates that the DOJ sees this as more than “a garden-variety case,” New York University law professor Harry First told Bisnow.
The DOJ’s intervention here underscores the potentially far-reaching impact the case could have “not only on the way businesses use technology to drive profits but also on the marketplace consumers confront,” ProPublica wrote. ProPublica’s investigation in 2022 raised antitrust questions about the way RealPage’s algorithm operates.
While the DOJ's filing doesn't necessarily indicate that it believes the tenants should win, the department does argue against throwing the case out now, First said.
The rental software company was named in more than 30 lawsuits that were consolidated in Nashville federal court, representing renters from across the country.
Other jurisdictions have taken up the issue. Earlier this month in Washington, D.C., the attorney general filed a lawsuit against RealPage and 14 major landlords in the city alleging that they worked together to hike rents.
“We appreciate the DOJ has taken an interest in this important litigation,” Scott + Scott Attorneys at Law LLP’s Patrick Coughlin, co-counsel for the tenants in the consolidated case, told Law 360. “Family rents have been skyrocketing the last several years and we believe it is due to the alleged concerted action of landlords throughout the country.”
The Justice Department’s insight at this juncture serves as a boost to the renters’ case. The DOJ is a trusted expert on antitrust law, and its filing might help convince the judge that the plaintiffs' position is correct, First said.
“There’s a lot of distance between this and success, but the Justice Department is coming out and saying the plaintiffs have the right to go forward,” First said.