The Department of Justice and eight states’ attorney generals filed an antitrust lawsuit against rental software company RealPage on Friday, accusing it of using algorithms to drive up rent prices nationwide. The suit alleges RealPage’s software, YieldStar, gathers sensitive information from landlords and rental companies, which it feeds into algorithms that recommend prices and practices that limit competition and force renters to pay more.
“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 wrote in a DOJ press release.
RealPage’s software reportedly manages more than 24 million rental units globally. The DOJ’s complaint accuses the Texas-based company of contracting with competing landlords who agree to share “nonpublic, competitively sensitive information” about rental rates and other lease terms. RealPage then trains YieldStar’s algorithms, which generate pricing and other competitive recommendations “based on their and their rivals’ competitively sensitive information,” according to the DOJ.
The DOJ was joined in its suit by the attorney generals of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington. It filed the lawsuit in the US District Court for the Middle District of North Carolina, accusing the company of violating Sections 1 and 2 of the Sherman Act. The 1890 law is considered the bedrock of US antitrust actions.
In addition, the lawsuit accuses RealPage of monopolizing the rental market in a feedback loop that “strengthens RealPage’s grip on the market,” making it harder for “honest businesses to compete on the merits.”
The DOJ’s complaint cites internal documents and sworn testimony from the company, along with landlords who have used the software to allegedly price-gouge renters. The agency says RealPage admitted its software was designed to maximize rent prices, saying its product excels at “driving every possible opportunity to increase price,” “avoid[ing] the race to the bottom in down markets” and “a rising tide raises all ships.”
In addition, the DOJ quotes a RealPage executive as observing that its software helps landlords avoid competing. The executive allegedly opined that “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.” (Perhaps the executive doesn’t consider renters part of “the greater good.”)
The DOJ also quotes a RealPage executive as explaining to a landlord that its competitor data can help spot situations where they “may have a $50 increase instead of a $10 increase for the day.”
The suit even quotes a landlord’s comment that YieldStar helps the supply side control the market. “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing…”
