In Short:
The US Department of Justice has filed a lawsuit against RealPage, a company that helps landlords set apartment prices using an algorithm. The DOJ claims this system enables price coordination among landlords, hurting competition. RealPage, which controls 80% of market software, denies wrongdoing. This lawsuit, supported by eight state attorneys general, represents a significant legal challenge against the company.
Recently, a significant civil lawsuit was filed by the US Department of Justice (DOJ) alleging widespread collusion in apartment rental pricing in the United States, primarily attributed to a single company’s algorithm.
Allegations Against RealPage
The company at the center of this lawsuit is RealPage, a Texas-based provider of commercial revenue management software for landlords. The DOJ asserts that the software not only facilitates pricing but does so in a manner that enables clients to coordinate rental prices across markets, thereby undermining competition. According to the allegations, landlords input their rental rate and lease terms into RealPage’s system, which then generates a suggested price that often aligns with competitors, effectively coordinating prices.
Statements from the DOJ
Deputy Attorney General Lisa Monaco stated, “By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has found a modern way to violate a century-old law through systematic coordination of rental housing prices.”
Market Impact
The reach of RealPage is extensive; the DOJ claims that the company controls 80 percent of the market for software of this kind, affecting the pricing of approximately 3 million rental units nationwide. RealPage is already contending with multiple legal challenges, including lawsuits from the states of Arizona and Washington, DC, where its software reportedly sets prices for over 90 percent of apartment units in large buildings. The scrutiny surrounding RealPage’s algorithmic pricing practices intensified following a 2022 ProPublica investigation that examined how its YieldStar software operates.
Legal Significance
The DOJ’s civil lawsuit marks a notable escalation in legal actions against RealPage, being the first case in which the DOJ has taken civil action over algorithm-driven price-fixing. Previous government cases involved criminal charges against individual sellers but did not focus specifically on the algorithms themselves.
Company’s Response
The complaint includes quotes from RealPage executives that appear to recognize the anticompetitive aspects of their software, with one executive allegedly suggesting a collaborative approach amongst industry players rather than competitive tactics which could harm the sector overall. RealPage has adamantly denied any accusations of antitrust violations, even publishing a six-page digital pamphlet outlining their perspective on the allegations, asserting that their software benefits both housing providers and residents.
Conclusion
In response to the ongoing allegations, Deputy Attorney General Monaco emphasized the legal implications, stating, “Algorithms don’t exist in a law-free zone. Training a machine to break the law is still breaking the law.” The situation continues to unfold as more details emerge from the lawsuit and the company’s ongoing defenses.
