The DOJ, joined by eight states, filed suit against property management software company, RealPage, for using its price setting algorithm to maintain and increase the cost of rent nationwide. Landlords holding more than 16 million rental units pay RealPage to use its software. RealPage is alleged to collect granular data from these landlord-licensees about every aspect of their business, including competitively sensitive data on past and present lease prices and terms, renewals, and detailed information about inquiries and applications by potential tenants. RealPage allegedly obtains this data both through user-input into its software and through its more than 50,000 monthly phone calls to landlords. Using this competitively sensitive information, RealPage then recommends rent prices for landlords’ specific rental units. The DOJ alleges RealPage makes it extremely difficult for landlords to reject these recommendations. Among other policing measures, the DOJ claims that RealPage requires landlords to input sound business reasons for deviating from recommended prices, and will escalate any disagreement to a regional manager or internal revenue manager who will then try to persuade the landlord to accept RealPage’s recommendation. These tactics have proven effective, with more than 85% of units priced within 5% of RealPage’s recommendation.
Landlords use and accept RealPage’s recommended pricing on the promise that it will be profitable. RealPage’s alleged marketing mantra is that “a rising tide raises all ships.” Indeed, RealPage is alleged to have boasted to landlords that its software “curbs client’s instincts to respond to down-market conditions by either dramatically lowering price or by holding price when they are losing velocity and/or occupancy . . . Our tool ensures that landlords are driving every possible opportunity to increase price even in the most downward trending or unexpected conditions.” One RealPage executive is alleged to have put it even more succinctly, stating 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” and that if enough landlords agree to work with RealPage they would “likely move in unison versus against each other.”
The DOJ has asserted violations of the Sherman Antitrust Act against RealPage, whose algorithmic price recommendations it claims are nothing more than a novel way to conduct a classic price fixing scheme. As described by Attorney General Merrick Garland at a press conference, using software to coordinate pricing does not immunize a scheme from antitrust liability.
The case is United States v. RealPage, Inc., No. 24-cv-00710 (M.D.N.C.).
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About Raymond N. Barto
Raymond N. Barto's practice is focused on antitrust litigation. Ray is a Partner in the firm's New York office.
Raymond N. Barto
Partner at Faruqi & Faruqi, LLP
New York office
Tel: (212) 983-9330
Fax: (212) 983-9331
E-mail: rbarto@faruqilaw.com
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