The Department of Justice and the Federal Trade Commission have chimed in on a federal class-action lawsuit against Yardi Systems and 18 property management companies, arguing that the case should go forward despite an attempt by defendants to get it dismissed.
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The suit, filed in September 2023, alleges that Yardi and users of its Revenue IQ tool engaged in an antitrust scheme, eliminating competition from the market by outsourcing decisions about rent increases and implementing those increases across a group of landlords.
Yardi and other defendants filed a motion in December to dismiss the case, arguing that because landlords maintained pricing discretion over rent increases, they could not be held liable for price-fixing, Multifamily Dive reported.
But the DOJ and FTC, which enforce federal antitrust laws, beg to differ.
In the brief filed this month, the two agencies cite case law they say closes the book on whether competitors can agree to fix the starting point of pricing, even if actual charged prices vary. Defendants cannot argue that landlords retaining the ability to change prices dooms the lawsuit because the effectiveness of a scheme is not a requirement for per se illegality, the brief states.
“Just as competitors cannot agree to fix their final prices, competitors cannot agree to fix the starting point of their prices,” the brief states. “Both types of agreements corrupt the decentralized price-setting mechanism in the market, whether or not they ultimately succeed in raising or stabilizing prices.”
Seattle-based law firm Hagens Berman, which first brought the suit against Yardi and others, claims the tool formerly known as RENTmaximizer allowed landlords to overcharge tenants by 6% in certain areas.
The DOJ has also weighed in on an antitrust case against RealPage, another software company offering an algorithm to suggest rent pricing. In a November filing, the DOJ said that the RealPage algorithm is a high-tech spin on the age-old concept of price collusion, adding that the antitrust law does not become obsolete because conspirators find new ways to act in concert.
Lawsuits against RealPage and its users stemmed from an October 2022 ProPublica investigation that raised questions about whether the firm’s YieldStar software helped landlords coordinate pricing. The DOJ opened an investigation into RealPage the following month, and more than 30 lawsuits followed.
The lawsuits were later consolidated in Nashville federal court, representing renters from across the country.
It isn’t rare for the DOJ to get involved in a case like RealPage’s, New York University law professor Harry First previously told Bisnow, though it indicates that the agency saw it as more than “a garden-variety case.”
The RealPage suit names the company itself and a who's who of real estate investment trusts and multifamily industry heavyweights. Property management firms named in the Yardi lawsuit include Bridge Property Management, Kushner Real Estate Group and McWhinney.
CORRECTION, MARCH 12, 9:21 A.M. CT: A previous version of this story incorrectly named JLL as one of the defendants in the Yardi suit. The firm was removed from the suit in September.
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