DOJ sues software firm, alleging pricing algorithm enables landlords to raise rents

The Department of Justice (DOJ) sued the property management software company RealPage on Friday, alleging its pricing algorithm enables landlords to share sensitive pricing information and raise rental prices.

The lawsuit, which was joined by the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington, accuses RealPage of violating antitrust law by limiting competition among landlords.

“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” Attorney General Merrick Garland said in a statement.

“Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability, and the Justice Department will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them,” he added.

The DOJ alleges that RealPage contracts with competing landlords who share “nonpublic, competitively sensitive information” about rental rates, which is then used by its algorithmic pricing software to generate recommendations on pricing and other terms, according to a press release.

The lawsuit argues that this distorts competition, as landlords might otherwise lower rents or offer other financial concessions to attract renters.

It points to RealPage’s own words, noting that its software aims to drive “every possible opportunity to increase price.”

“There is a greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down,” one executive said, according to the lawsuit.

However, the DOJ argues, this is not how the free market is meant to work.

“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,” Deputy Attorney General Lisa Monaco said in a statement.

The lawsuit separately accuses RealPage of unlawfully maintaining a monopoly over commercial revenue management software through its “massive reservoir of ill-gotten competitively sensitive information.” The software firm controls at least 80 percent of the market, according to the DOJ’s complaint.

President Biden and Vice President Harris “know that too many Americans feel squeezed by high rents, and they are working every day to bring down housing costs,” said Lael Brainard, director of the White House National Economic Council (NEC), in a statement.

“The Biden-Harris Administration has made clear that no one should pay higher prices because of corporate lawbreaking and continues to support fair and vigorous enforcement of the antitrust laws to prevent illegal collusion,” Brainard added. “We continue to take all available actions to lower housing costs, from enacting the largest increase in federal rental assistance in decades to freeing up federal lands for affordable housing.”

— Updated at 3:49 p.m.

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