November 20th 2023.
In 2022, a ProPublica investigation revealed that a Texas software provider, RealPage, was allegedly using an algorithm to set rents for landlords in a way that maximized profits. This alarming practice raised warnings among experts that it could constitute a violation of antitrust laws. Now it appears that the Department of Justice (DOJ) has taken action. On Nov. 15, the DOJ filed an official statement of interest pertaining to the Sherman Act, the federal law governing antitrust law.
The DOJ’s decision to participate in a federal lawsuit against RealPage indicates a growing interest in the case from the federal government. Currently, there are multiple lawsuits against the company in California, Tennessee, and the District of Columbia. According to ProPublica, the class action suit filed by a group of renters in San Diego states that “algorithms are the new frontier” and “pose an even greater anticompetitive threat than the last.”
RealPage has denied the allegations being made in the various federal lawsuits filed against it. A statement emailed to ProPublica said that the company “strongly denies the allegations and will vigorously defend against the lawsuit.” The suit notes that using an algorithm to set prices does not make it automatically illegal. It becomes an antitrust violation when competitors, in this case landlords, share private and sensitive price and supply information to make pricing choices via an algorithm with the knowledge or expectation that others will do the same.
The outlet also reported that in the tenant lawsuits against RealPage, it is alleged that the company pushed its employees to accept what its software suggested. A former RealPage executive expressed their dismay with the way the company enabled landlords to raise rents at a record pace. The ex-executive also said 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., almost 90% of large apartment buildings 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. Schwab’s suit described their alleged scheme as a cartel and said that every dollar of increased rent that the cartel illegally squeezes from District renters contributes to widening wealth gaps and forces residents out of a District whose housing they can no longer afford.
The issue of RealPage's pricing algorithm was raised in a hearing in October of this year. The hearing, chaired by Sen. Amy Klobuchar, focused on competition and consumer rights. During the hearing, Maurice Stucke, a former prosecutor in the Justice Department’s antitrust division and a University of Tennessee law professor, said that the antitrust laws can effectively punish and deter the alleged anti-competitive behavior. He added that this would be the case even if humans had agreed among themselves to fix the price, and RealPage's pricing algorithm was used to facilitate their collusion.
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