The DOJ files an antitrust suit against a software company for allegedly manipulating rent prices

The DOJ files an antitrust suit against a software company for allegedly manipulating rent prices

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 RealPageā€™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.

ā€œAmericans 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.

RealPageā€™s software reportedly manages more than 24 million rental units globally. The DOJā€™s complaint accuses the Texas-based company of contracting with competing landlords who agree to share ā€œnonpublic, competitively sensitive informationā€ about rental rates and other lease terms. RealPage then trains YieldStarā€™s algorithms, which generate pricing and other competitive recommendations ā€œbased 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 ā€œstrengthens RealPageā€™s grip on the market,ā€ making it harder for ā€œhonest businesses to compete on the merits.ā€

The DOJā€™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 ā€œdriving every possible opportunity to increase price,ā€ ā€œavoid[ing] the race to the bottom in down marketsā€ and ā€œa 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 ā€œthere 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 doesnā€™t consider renters part of ā€œthe 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 ā€œmay have a $50 increase instead of a $10 increase for the day.ā€

The suit even quotes a landlordā€™s comment that YieldStar helps the supply side control the market. ā€œI always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. Thatā€™s classic price fixingā€¦ā€