The rental market in the US has been plagued by suspicions of price fixing and coordinated pricing strategies among landlords for years. However, a new civil lawsuit filed by the US Department of Justice has shed light on a disturbing revelation – RealPage, a Texas-based company that provides commercial revenue management software for landlords, may be at the heart of the issue. The lawsuit alleges that RealPage’s algorithm is essentially facilitating price fixing by providing landlords with suggested prices based on data input, effectively hindering competition and enabling coordination among property owners.
RealPage’s dominance in the market is staggering, with the company controlling 80 percent of the market for its software. This means that the prices of around 3 million rental units across the country are potentially being influenced by RealPage’s algorithm. The company’s software is used in a variety of markets, including in large apartment buildings in cities like Washington, DC, where it allegedly prices more than 90 percent of units. These findings have raised serious concerns about the impact of algorithmic pricing on rental markets and competition.
The DOJ’s lawsuit highlights the extent to which RealPage’s algorithmic pricing strategy has been scrutinized. A ProPublica investigation in 2022 provided detailed insights into how RealPage’s YieldStar software operates, shedding light on the potential anticompetitive nature of the company’s practices. The lawsuit, which was joined by the attorneys general of eight states, marks a significant escalation in legal action against RealPage and is the first civil action of its kind targeting the use of algorithms in price fixing.
Despite the mounting allegations and legal actions against it, RealPage has vehemently denied any wrongdoing. The company has gone to great lengths to defend its practices, publishing digital pamphlets and FAQ pages to address the accusations of antitrust violations. RealPage executives have been quoted as justifying their practices by claiming that there is a “greater good” in ensuring the success of everyone in the industry rather than engaging in cutthroat competition that can harm the market as a whole. However, these claims have been met with skepticism by the DOJ and other legal authorities.
The case of RealPage raises broader questions about the role of algorithms in facilitating price fixing and anticompetitive practices in various industries. While technology has brought about numerous benefits and efficiencies, it has also created new challenges in regulating and monitoring the use of algorithms in business operations. The DOJ’s lawsuit against RealPage serves as a warning to companies that may be engaging in similar practices, signaling that algorithms are not exempt from antitrust laws and regulations.
The case of RealPage underscores the need for greater scrutiny and regulation of algorithmic pricing practices in the rental market. The allegations of price fixing and coordinated pricing strategies have far-reaching implications for both landlords and tenants, highlighting the importance of ensuring fair competition and transparency in the real estate industry. As technology continues to play an increasingly central role in business operations, it is crucial for regulators and legal authorities to stay vigilant in monitoring and addressing potential abuses of algorithms in setting prices and influencing market dynamics.
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