The Department of Justice has launched an antitrust lawsuit against real estate software company RealPage Inc., alleging it used a pricing algorithm to facilitate illegal rent hikes.
At a Glance
- The DOJ has sued RealPage Inc. for allegedly enabling landlords to coordinate rent increases.
- Attorneys general from eight states are supporting the lawsuit.
- RealPage’s algorithm is accused of manipulating rental market prices.
- RealPage denies the claims, calling them “devoid of merit.”
DOJ Files Antitrust Lawsuit Against RealPage Inc.
The Department of Justice has filed an antitrust lawsuit against RealPage Inc., a software firm specializing in algorithmic rent-setting tools. The suit alleges that RealPage’s pricing algorithm allows landlords to collaborate and set inflated rental prices, thus manipulating the market. This case brings to the forefront concerns about technological interference in free market operations, particularly in sectors as vital as housing.
https://www.youtube.com/watch?v=Z95Q4ia6VOM
According to the complaint, RealPage’s algorithm aggregates confidential data from competitive properties and suggests elevated rental rates. This practice, the DOJ argues, reduces competition and keeps rents artificially high, hurting renters across the country. The lawsuit emphasizes the ethical responsibilities of software developers in maintaining market fairness.
New: The lawsuit, which comes in the wake of a ProPublica investigation into the Texas company, accuses RealPage of taking part in an illegal price-fixing scheme to reduce competition among landlords to boost prices — and profits. https://t.co/Y2n8fPdbIh
— ProPublica (@propublica) August 23, 2024
Widespread Support for Legal Action
The lawsuit has garnered support from the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington. These states echo the DOJ’s concerns about the detrimental impact of RealPage’s algorithm on housing affordability. They claim the software creates a feedback loop that prevents landlords from adjusting rents competitively, thereby stifling healthy market dynamics.
“Americans should not have to pay more in rent simply because a company has found a new way to scheme with landlords to break the law,” said Attorney General Merrick Garland.
RealPage’s software, YieldStar, is specifically cited in the lawsuit for its role in manipulating rental prices using algorithms based on nonpublic, competitively sensitive information from landlords. This allows the software to suggest rents higher than what would naturally occur in a competitive market, the complaint claims.
Two years ago, ProPublica investigated RealPage for its role in helping landlords use algorithms to set rent prices.
Today, the DOJ has sued the company, accusing it of taking part in an illegal price-fixing scheme.
Major impact from @hvogell's reportinghttps://t.co/TYAgDqY0DA
— Annie Waldman (@AnnieWaldman) August 23, 2024
RealPage’s Denial of Claims
RealPage has emphatically denied the lawsuit’s allegations, describing them as “devoid of merit.” The software firm argues that its algorithm is designed to be legally compliant and has long been used responsibly to assist landlords in setting rents. RealPage plans to vigorously defend itself against the charges, asserting that the DOJ’s lawsuit is a distraction from real economic issues.
“We are disappointed that, after multiple years of education and cooperation on the antitrust matters concerning RealPage, the DOJ has chosen this moment to pursue a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years,” RealPage stated.
The antitrust case follows a nearly two-year investigation and comes at a time when the Biden administration is focusing on high housing costs. The administration has taken actions, such as increasing federal rental assistance and freeing up federal lands for affordable housing, to mitigate the nation’s housing crisis.
“Everybody knows the rent is too damn high, and we allege this is one of the reasons why,” said Attorney General Merrick Garland during a recent press conference.
Impact and Broader Implications
The lawsuit outlines several broader implications for tech companies involved in market-pricing strategies. The complaint points out that RealPage’s practices not only keep rents high but also diminish the rental market’s competitiveness. This case could set a precedent for how antitrust laws are applied to algorithm-driven pricing strategies in various sectors.
“Modern-day wrongdoers cannot hide behind software algorithms and artificial intelligence to violate the law,” said Assistant Attorney General Jonathan Kanter.
Finally, Deputy Attorney General Lisa Monaco emphasized the importance of addressing modern violations of century-old antitrust laws. “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 — undermining competition and fairness for consumers in the process.”
The RealPage lawsuit serves as a pivotal moment in the ongoing conversation about tech’s role in market regulation and consumer protection. As this legal battle unfolds, it will undoubtedly influence future regulatory approaches toward algorithmic pricing models in real estate and beyond.
