If you’ve ever rented an apartment in the US, you might feel like the pricing system is unfairly coordinated: rental costs rise together across many buildings and cities. The US Department of Justice has filed a civil lawsuit asserting that this widespread issue may be linked to a single company’s algorithm, which systematically influences apartment pricing.
The company in question is RealPage, a Texas-based provider of commercial revenue management software for property owners. Essentially, this software assists in setting apartment prices. According to the DOJ’s lawsuit, RealPage’s software is used for coordination among landlords, which negatively impacts competitive pricing. Landlords input rental data into the software, which then proposes prices that are artificially aligned with others, reducing competition.
Deputy Attorney General Lisa Monaco explained that RealPage utilizes advanced algorithms that manipulate sensitive data to orchestrate rental prices, violating longstanding antitrust laws.
RealPage is a dominant player in its market, holding around 80 percent market share. Its software influences pricing for approximately 3 million housing units nationwide. The company is already facing several lawsuits, including one from Arizona and a separate case in Washington, DC. The latter alleges that over 90 percent of large apartment units use RealPage’s software for price setting. The company’s pricing strategies came into the spotlight following a 2022 ProPublica report focusing on their YieldStar software.
The legal cases and investigations into RealPage highlight ongoing concerns about the fairness and competitiveness of housing prices across the United States.
The DOJ civil lawsuit, now supported by the attorneys general of eight states, marks a significant escalation in legal actions against the corporation. This case is unprecedented, according to officials on a background call about the complaint. While there have been previous criminal charges against an Amazon seller for algorithm-enabled price-fixing, this is the first time a civil suit has targeted the algorithm itself as the instrument of infringement, a Justice Department official stated.
According to the lawsuit, RealPage executives allegedly admitted to the anticompetitive nature of their product. An executive from RealPage was quoted as saying, “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.”
RealPage has consistently refuted any allegations of antitrust breaches, even releasing a six-page digital pamphlet explaining “the Real Story” about its products, reinforced by an extensive FAQ on its public policy site. The company had not responded to a request for comment. Their site asserts, “Attacks on the industry’s revenue management are based on demonstrably false information. RealPage revenue management software benefits both housing providers and residents.”
RealPage’s senior vice president of communications and creative, Jennifer Bowcock, expressed her disappointment saying, “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’s revenue management software is purposely built to be legally compliant, and we have a long history of working constructively with the DOJ to show that.”
The DOJ contends that algorithms are not exempt from legal oversight. Monaco, during a press conference, emphasized, “Training a machine to break the law is still breaking the law.” The complaint suggests that the algorithms in question consistently push rental prices higher. According to a DOJ press release, “RealPage’s software is designed to increase prices, discourage reductions, and strengthen landlords’ control over pricing.” Furthermore, RealPage doesn’t merely advise on pricing—it often sets them directly.
“RealPage ensures landlords adhere to these pricing guidelines,” stated U.S. attorney general Merrick Garland at the press conference. He noted that many landlords have delegated their pricing powers to RealPage through an ‘auto-accept’ feature, which essentially allows RealPage to set rental prices.
The DOJ asserts that RealPage’s approach with data collection and pricing advice creates a “self-reinforcing feedback loop,” which not only boosts its control within the apartment revenue management software market but also allegedly establishes a monopoly. According to the DOJ, this puts any law-abiding competitor at a significant disadvantage.
The Justice Department has spent the past several years staffing up with technologists and data scientists, better enabling them to “interrogate the code,” as multiple officials described the investigative process. While this is the first major algorithmic collusion case, DOJ officials suggested it would be far from the last.
Update 8/23/24 4:34pm ET: This story has been updated with a statement from RealPage.