A property management software firm engaged in an illegal price-fixing scheme with landlords nationwide to boost rental prices and profits, the U.S. Department of Justice (DOJ) said in a civil antitrust lawsuit.
The software-as-a-service (SaaS) company RealPage illegally schemed to “decrease competition among landlords in apartment pricing and to monopolize the market for commercial revenue management software that landlords use to price apartments,” the DOJ said in a statement.
“RealPage’s egregious, anticompetitive conduct allows landlords to undermine fair pricing and limit housing options while stifling necessary competition,” said Acting Associate Attorney General Benjamin C. Mizer.
The lawsuit was filed on Friday (Aug. 23) in the U.S. District Court for the Middle District of North Carolina and alleges that RealPage violated Sections 1 and 2 of the Sherman Act. The DOJ alleges the company violated antitrust laws through its algorithm that landlords use to get recommended rental prices for millions of apartments nationwide. The DOJ also alleges the company took over the market for such price-setting software, effectively monopolizing it.
“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,” Attorney General Merrick Garland told reporters during a press conference.
The antitrust lawsuit follows a 2022 ProPublica investigation into what role RealPage had in helping landlords set rental prices nationwide. Since the start of the ProPublica probe, senators have introduced legislation and several federal lawsuits were filed by tenants, the nonprofit news agency said.
“RealPage contracts with competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates and other lease terms to train and run RealPage’s algorithmic pricing software,” the DOJ said.
Rents across the country soared in 2021 and 2022 and remained high despite flatter demand. The RealPage algorithm gives property owners the ability to coordinate prices and avoid competition.
DOJ officials have been investigating RealPage, headquartered in Richardson, Texas, for close to two years, and had data scientists wade through computer code to identify how the company’s algorithms set prices. The DOJ’s complaint cites internal documents and sworn testimony from RealPage and commercial landlords.
“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents. 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,” Garland said.
RealPage acknowledged that its software is aimed at maximizing prices for landlords, referring to its products as “driving every possible opportunity to increase price,” “avoid[ing] the race to the bottom in down markets,” and “a rising tide raises all ships,” according to the DOJ’s allegations.
According to the DOJ, a RealPage executive had indicated its SaaS products help landlords avoid competing on merit alone, and reportedly said “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”
Using competitor data can help identify situations where the landlord “may have a $50 increase instead of a $10 increase for the day,” a RealPage executive explained to a landlord, per the DOJ.
Another landlord commented about RealPage’s product, “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing…” according to the lawsuit.
“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,” said Deputy Attorney General Lisa Monaco.
“Training a machine to break the law is still breaking the law. Today’s action makes clear that we will use all our legal tools to ensure accountability for technology-fueled anticompetitive conduct,” Monaco added.
RealPage disagrees and denies the allegations, stating it “uses data responsibly, including limited aggregated and anonymized nonpublic data where accuracy aids pro-competitive uses,” the company said on its blog in June.
“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,” the company said.
Lack of affordable rental housing is a complex issue affecting the entire country, RealPage said. The multifaceted quandary was created by many factors, including economic and political influences, RealPage said, pointing to:
- Undersupply of rental housing units
- High demand in numerous zip codes
- Inflationary pressures relating to building, insurance, and property management
- Inefficient and/or unnecessarily laborious permit and zoning requirements
- Higher mortgage rates and home prices driving more people out of a buyers’ market
- Changes in where and how people choose to live
“Housing affordability should be the real focus. RealPage is proud of the role our customers play in providing safe and affordable housing to millions of people. Despite the noise, we will continue to innovate with confidence and make sure our solutions continue to benefit residents and housing providers, alike,” RealPage CEO and President Dana Jones said in June.
The Sherman Antitrust Act of 1890 —named for Republican Ohio Sen. John Sherman — was the first federal law prohibiting monopolistic business practices. The law could be difficult to apply to tech-centered situations, ProPublica reported, citing experts.
RealPage is owned by the Chicago-headquartered private equity company Thoma Bravo. In its June statement, the company said landlords using its software can take its advice or not. The company denies any wrongdoing.
