According to the letter that AG Garland sent, “RealPage has discovered a new way to scheme with landlords to break the law,” and “Americans should not be forced to pay more in rent because of this.”
On Friday, the United States Department of Justice and eight state attorneys general filed an antitrust complaint against the rental software business RealPage. The lawsuit accuses RealPage of employing algorithms to push up rent costs across the country. In the lawsuit, it is said that RealPage’s YieldStar software collects confidential information from landlords and rental companies. This information is then fed into algorithms that advocate prices and practices that restrict competition and push tenants to pay higher rates.
“Americans should not be forced 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 wrote in a press statement issued by the Department of Justice (DOJ).
According to reports, the software developed by RealPage controls more than 24 million rental units across the world. According to the complaint filed by the Department of Justice, the corporation based in Texas is accused of entering into contracts with rival landlords who agree to disclose “nonpublic, competitively sensitive information” including rental rates and other details of lease agreements. The algorithms that generate pricing and other competitive suggestions are then trained by RealPage. According to the Department of Justice, these algorithms generate pricing and other competitive recommendations “based on their and their rivals’ competitively sensitive information.”
Attorneys general from the states of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington joined the Department of Justice in its lawsuit filed against the defendant. It filed the complaint in the United States District Court for the Middle District of North Carolina, alleging that the corporation had violated Sections 1 and 2 of the Sherman Act. Most antitrust lawsuits in the United States are based on the statute that was passed in 1890.
Furthermore, the lawsuit alleges that RealPage has monopolized the rental market through a feedback loop that “strengthens RealPage’s grip on the market,” so making it more difficult for “honest businesses to compete on the merits.”
Internal papers and sworn evidence from the corporation are cited in the complaint filed by the Department of Justice (DOJ). Additionally, the complaint includes landlords who have allegedly utilized the software to price-gouge renters. According to the agency, RealPage has revealed that its software was developed with the intention of reaching the highest possible rent pricing. The company has stated that its product excels at “driving every possible opportunity to increase price,” “avoiding the race to the bottom in down markets,” and “a rising tide raises all ships.”
The Department of Justice also cites an executive from RealPage who makes the observation that the company’s software assists landlords in avoiding competition. The CEO is said to have expressed the opinion that “there is greater good in everybody succeeding as opposed to essentially trying to compete against one another in a way that actually keeps the entire industry down.” There is a possibility that the CEO does not consider tenants to be a part of “the greater good.”
The Department of Justice also cites an official from RealPage who was telling to a landlord that the company’s competition data can assist in identifying scenarios in which the landlord “may have a $50 increase instead of a $10 increase for the day.” A comment made by a landlord is even cited in the lawsuit, which asserts that YieldStar assists the supply side in controlling the market. “I have always loved this product because your algorithm makes suggestions regarding rentals and terms based on confidential information obtained from other members. It’s the quintessential example of price fixing.