
The Department of Justice and eight statesā 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 RealPageās 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.
āAmericans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,ā Attorney General Merrick Garland wrote in a DOJ press release.
RealPageās software reportedly manages more than 24 million rental units globally. The DOJās complaint accuses the Texas-based company of contracting with competing landlords who agree to share ānonpublic, competitively sensitive informationā about rental rates and other lease terms. RealPage then trains YieldStarās algorithms, which generate pricing and other competitive recommendations ābased on their and their rivalsā competitively sensitive information,ā 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 āstrengthens RealPageās grip on the market,ā making it harder for āhonest businesses to compete on the merits.ā
The DOJās 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 ādriving every possible opportunity to increase price,ā āavoid[ing] the race to the bottom in down marketsā and āa rising tide raises all ships.ā
In addition, the DOJ quotes a RealPage executive as observing that its software helps landlords avoid competing. The executive allegedly opined that āthere is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.ā (Perhaps the executive doesnāt consider renters part of āthe greater good.ā)
The DOJ also quotes a RealPage executive as explaining to a landlord that its competitor data can help spot situations where they āmay have a $50 increase instead of a $10 increase for the day.ā
The suit even quotes a landlordās comment that YieldStar helps the supply side control the market. āI always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. Thatās classic price fixingā¦ā