Federal Government Files Lawsuit Against Software Company Accused of Facilitating Rent Collusion Across the Country
The Department of Justice, along with eight states, has filed a case against RealPage, coinciding with heightened concerns about housing costs ahead of the 2024 election.
TroibNews 
The Justice Department, along with several state attorneys general, has initiated legal action against software firm RealPage Inc., for its role in allegedly orchestrating a nationwide plot to artificially inflate rental prices.
On Friday, a lawsuit was lodged against the Texas-based company by the DOJ and eight state attorneys general. They claim that RealPage conspired to diminish "competition among landlords in pricing rental properties and sought to dominate the market for [software] used by landlords to set rental prices." The lawsuit states that the company "has built a business out of frustrating the natural forces of competition."
This legal action emerges amid growing concerns from voters about the rising cost of living, as expressed during a period of significant inflation not seen in 40 years.
“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,” stated Attorney General Merrick Garland. “Everybody knows the rent is too damn high, and we allege this is one of the reasons why,” he further remarked during a press briefing.
“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents,” Garland said. “Using software as the sharing mechanism does not immunize this scheme from [antitrust] liability, and the Justice Department will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them.”
The attorneys general from states such as North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington have joined the legal challenge, which was filed in a North Carolina federal court. Prior similar lawsuits have also been undertaken by the attorneys general of Washington, D.C., and Arizona.
“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," responded RealPage spokesperson Jennifer Bowcock. "It is merely a distraction from the fundamental economic and political issues driving inflation throughout our economy — and housing affordability in particular — which should be the focus of policymakers in Washington, D.C."
The DOJ’s plans to take legal action against RealPage were first disclosed by PMG.
Vice President Kamala Harris has emphasized the reduction of housing costs as a pivotal aspect of her presidential campaign, committing last month to “take on corporate landlords and cap unfair rent increases.”
According to Zillow, home prices and rents have soared, with rents increasing over 30 percent since the pandemic began in March 2020.
In July, the White House proposed removing a depreciation tax credit for two years for landlords owning more than 50 units who hike rents by over 5 percent annually, affecting approximately 20 million units nationwide.
This lawsuit is part of a broader initiative by the DOJ and the Federal Trade Commission to address corporate dominance across various sectors. Recent legal actions have targeted major companies like Google, Amazon, Apple, and Ticketmaster, along with key players in the food, chemical, and healthcare industries.
The lawsuit details how RealPage collaborates with landlords across numerous cities to facilitate the exchange of sensitive pricing information, which in turn is used to refine the company’s algorithmic pricing models, enabling rent collusion among competitors.
Jonathan Kanter from the DOJ indicated the government’s diligence in dealing with such algorithmic collusion. He mentioned that the team, including lawyers, economists, and data scientists, scrutinized the code to understand how algorithms might use sensitive data from landlords to recommend and set prices.
According to the lawsuit, RealPage has marketed its products as capable of “driving every possible opportunity to increase price even in the most downward trending or unexpected conditions.”
“RealPage’s revenue management software is purposely built to be legally compliant, and we have a history of working constructively with the DOJ to show that,” said Bowcock. She cited the DOJ’s antitrust clearance in 2017 for RealPage’s acquisition of another software provider, LRO, as proof of their operations within legal boundaries.
While RealPage acknowledges using non-public yet anonymous data, it argues that its market share in any particular city is minimal. For instance, in San Francisco, the company claims its software is utilized in less than 10 percent of rental properties. Moreover, landlords reportedly reject about half of the pricing recommendations made by the software.
Focus in the lawsuit is particularly directed at RealPage’s YieldStar service, which dominates about 80 percent of the market for such software, impacting about three million rental units nationwide.
While no specific landlords have been named defendants, the DOJ has made it clear that they too are under investigation. Additionally, there is an ongoing criminal price-fixing investigation involving both RealPage and the landlords, also initially reported by PMG.
Alejandro Jose Martinez for TROIB News
On Friday, a lawsuit was lodged against the Texas-based company by the DOJ and eight state attorneys general. They claim that RealPage conspired to diminish "competition among landlords in pricing rental properties and sought to dominate the market for [software] used by landlords to set rental prices." The lawsuit states that the company "has built a business out of frustrating the natural forces of competition."
This legal action emerges amid growing concerns from voters about the rising cost of living, as expressed during a period of significant inflation not seen in 40 years.
“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,” stated Attorney General Merrick Garland. “Everybody knows the rent is too damn high, and we allege this is one of the reasons why,” he further remarked during a press briefing.
“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents,” Garland said. “Using software as the sharing mechanism does not immunize this scheme from [antitrust] liability, and the Justice Department will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them.”
The attorneys general from states such as North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington have joined the legal challenge, which was filed in a North Carolina federal court. Prior similar lawsuits have also been undertaken by the attorneys general of Washington, D.C., and Arizona.
“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," responded RealPage spokesperson Jennifer Bowcock. "It is merely a distraction from the fundamental economic and political issues driving inflation throughout our economy — and housing affordability in particular — which should be the focus of policymakers in Washington, D.C."
The DOJ’s plans to take legal action against RealPage were first disclosed by PMG.
Vice President Kamala Harris has emphasized the reduction of housing costs as a pivotal aspect of her presidential campaign, committing last month to “take on corporate landlords and cap unfair rent increases.”
According to Zillow, home prices and rents have soared, with rents increasing over 30 percent since the pandemic began in March 2020.
In July, the White House proposed removing a depreciation tax credit for two years for landlords owning more than 50 units who hike rents by over 5 percent annually, affecting approximately 20 million units nationwide.
This lawsuit is part of a broader initiative by the DOJ and the Federal Trade Commission to address corporate dominance across various sectors. Recent legal actions have targeted major companies like Google, Amazon, Apple, and Ticketmaster, along with key players in the food, chemical, and healthcare industries.
The lawsuit details how RealPage collaborates with landlords across numerous cities to facilitate the exchange of sensitive pricing information, which in turn is used to refine the company’s algorithmic pricing models, enabling rent collusion among competitors.
Jonathan Kanter from the DOJ indicated the government’s diligence in dealing with such algorithmic collusion. He mentioned that the team, including lawyers, economists, and data scientists, scrutinized the code to understand how algorithms might use sensitive data from landlords to recommend and set prices.
According to the lawsuit, RealPage has marketed its products as capable of “driving every possible opportunity to increase price even in the most downward trending or unexpected conditions.”
“RealPage’s revenue management software is purposely built to be legally compliant, and we have a history of working constructively with the DOJ to show that,” said Bowcock. She cited the DOJ’s antitrust clearance in 2017 for RealPage’s acquisition of another software provider, LRO, as proof of their operations within legal boundaries.
While RealPage acknowledges using non-public yet anonymous data, it argues that its market share in any particular city is minimal. For instance, in San Francisco, the company claims its software is utilized in less than 10 percent of rental properties. Moreover, landlords reportedly reject about half of the pricing recommendations made by the software.
Focus in the lawsuit is particularly directed at RealPage’s YieldStar service, which dominates about 80 percent of the market for such software, impacting about three million rental units nationwide.
While no specific landlords have been named defendants, the DOJ has made it clear that they too are under investigation. Additionally, there is an ongoing criminal price-fixing investigation involving both RealPage and the landlords, also initially reported by PMG.
Alejandro Jose Martinez for TROIB News
