The Justice Department and eight state attorneys general filed an antitrust lawsuit Friday accusing rental software company RealPage of using algorithms to inflate rental prices across the country. The lawsuit alleges that RealPage’s software, YieldStar, collects sensitive data from landlords and rental companies and feeds it into algorithms that recommend rates and practices that limit competition and force renters to pay more.
“Americans shouldn’t have to pay more rent because a company has found a new way to scheme with landlords to break the law,” Attorney General Merrick Garland he wrote In a DOJ press release.
RealPage software reported manages more than 24 million rental units globally. The DOJ’s complaint accuses the company of contracting with competing landlords who agreed to share “non-public, competitively sensitive information” about rent prices and other lease terms. RealPage then trains YieldStar’s algorithms, which generate pricing and other competitive recommendations “based on competitive intelligence of themselves and their competitors,” according to the DOJ.
The DOJ was joined by the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington. He filed suit in the United States District Court for the Middle District of North Carolina, accusing the company of violating sections 1 and 2 of the Sherman Act. The 1890 Act is considered the foundation 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” and makes it difficult for “honest businesses to compete on merits.”
The DOJ’s complaint cites internal documents and sworn statements from the company, as well as landlords who used the software to undercut tenants. The agency acknowledged that RealPage’s software was designed to increase rental prices, saying its product excelled at “handling every opportunity to increase the price.”[ing] a race to the bottom in down markets’ and ‘a rising tide lifts all ships’.
In addition, the DOJ quotes a RealPage manager as saying that its software helps hosts avoid competition. “There’s a greater good in everyone succeeding than trying to compete with each other in a way that brings down the entire industry,” the executive allegedly said. (Perhaps the executive does not consider tenants part of the “greater good”.)
The DOJ also quotes a RealPage manager as explaining that competitor data can help a host spot situations where “there might be a $50 increase instead of a $10 increase for the day.”
The suit even quotes one homeowner as commenting that YieldStar helps the supply side control the market. “I’ve always liked this product because your algorithm uses property data from other subscribers to suggest rents and durations. This is classic price fixing…”
