In 2022, a ProPublica investigation alleged that Texas software provider RealPage was using an algorithm that recommended that landlords set rents to maximize profits, which experts cautioned could constitute a violation of antitrust laws. Now, it appears that the Department of Justice (DOJ) has found cause to pursue action against the company, as it filed an official statement of interest pertaining to the Sherman Act on Nov. 15, ProPublica reports.
The Sherman Act is the federal law governing antitrust law, and the DOJ’s willingness to participate in a federal lawsuit against RealPage indicates escalating interest in the case. There are now federal suits against the company in several states, including California and Tennessee, and in the District of Columbia.
A class-action suit was
filed by a group of renters in San Diego. “Algorithms are the new frontier,” federal prosecutors said in their lawsuit. “And, given the amount of information an algorithm can access and digest, this new frontier poses an even greater anticompetitive threat than the last.”A statement from RealPage emailed to ProPublica said the company “strongly denies the allegations and will vigorously defend against the lawsuit.”
ProPublica reported that tenant lawsuits against RealPage maintain that the company encouraged landlords to share data collectively to set price points. Prosecutors say it doesn’t matter whether or not the landlords communicated with each other; the result is still a price-fixing scheme.
While using an algorithm to set prices does not automatically make such an arrangement illegal, prosecutors say it becomes an antitrust violation when competitors, in this instance the landlords, combine private and sensitive prices and supply information to make pricing choices via algorithm, with the knowledge or expectation that others will engage in the same practice.
According to a federal lawsuit filed in the District of Columbia Superior Court, RealPage devised a system that pushed its employees to accept what its software spit out. A former RealPage executive involved with creating the software “expressed dismay with the way RealPage has enabled lessors to collectively raise rents at record pace.” The ex-executive also said in the lawsuit that the company’s practice of setting a price and consistently raising it “bastardized” the company’s original intention for the software.
In Washington, D.C., 90% of large
apartment buildings, defined as those with 50 units or more, use RealPage software. As a result, Attorney General of the District of Columbia Brian Schwab brought a suit against RealPage and 14 other large apartment landlords, accusing them of “colluding to illegally raise rents for tens of thousands of DC residents.”Schwab’s suit describes the scheme as a “cartel,” saying, “Every dollar of increased rent that the cartel illegally squeezes from District renters contributes to widening wealth gaps, forces hardworking residents to forgo other uses of their money, and pushes residents out of a District whose housing they increasingly cannot afford.”
In October, Sen. Amy Klobuchar,
the chair of a committee on antitrust policy, held a hearing that focused on competition and consumer rights, and the RealPage controversy came up. Maurice Stucke, a former prosecutor in the Justice Department’s antitrust division and a University of Tennessee law professor, said during his testimony to the committee, “So one issue for you is can the antitrust laws effectively punish and deter this alleged anti-competitive behavior?“The short answer is yes, if humans agreed among themselves to fix price, and RealPage’s pricing algorithm was then used to facilitate their collusion.”
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