Justice Department: Rent-Setting Algorithms May Be Price-Fixing

The U.S. Department of Justice says RealPage rent-setting algorithms may be price-fixing that may be a violation of anti-trust laws.

The U.S. Department of Justice has filed a statement of interest in federal court in Nashville saying that software company RealPage’s rent-setting algorithms amount to a new kind of price-fixing that may be a violation of anti-trust laws, according to reports.

Multiple tenants across the country have sued RealPage claiming the tech company’s apartment software helped landlords collude to inflate rents. The lawsuits from around the country were consolidated in federal court in Nashville.

The Justice Department wrote that in the past, collusion has happened with “a formal handshake in a clandestine meeting,” they wrote. “Algorithms are the new frontier, and, given the amount of information an algorithm can access and digest, this new frontier poses an even greater anticompetitive threat than the last.”

A ProPublica investigation last year found that Texas-based software provider RealPage used rent-setting algorithms to recommend rents to landlords across the country to maximize profits — a practice that experts said may violate antitrust laws.

RealPage has denied the allegations.

“Antitrust enforcers have struggled to apply decades-old laws to new technologies such as RealPage’s rent-setting software, which have changed the way competitors interact with one another and with customers,” ProPublica says.

But, prosecutors said, whether firms use a software algorithm or human interactions to create the scheme “should be of no legal significance.”

“Automating an anticompetitive scheme does not make it less anticompetitive,” the DOJ said in the filing.

“As described in federal lawsuits filed by tenants, RealPage invited concerted action among landlords, including the sharing of nonpublic data with the software, with the purpose of raising rents,” prosecutors wrote in their memorandum. “The arrangement is still price-fixing regardless of whether competing landlords ever communicated with one another about prices,” ProPublica reported that prosecutors said.

“Put simply, RealPage allegedly replaces independent competitive decision-making on prices, which often leads to lower prices for tenants, with a price-fixing combination that violates” federal antitrust law, prosecutors wrote.

“Not every use of an algorithm to set price violates federal law,” they noted, but it is “unlawful when, as alleged here, competitors knowingly combine their sensitive, nonpublic pricing and supply information in an algorithm that they rely upon in making pricing decisions, with the knowledge and expectation that other competitors will do the same.”

Last year, 17 Democratic members of the U.S. House of Representatives sent a letter to the Department of Justice and the Federal Trade Commission asking the agencies to investigate RealPage’s rent-setting software, according to ProPublica.

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Investigation Called For Over RealPage Rent-Setting Software