The Justice Department filed an antitrust lawsuit against Texas-based tech company RealPage Friday, alleging its price-setting software stifles competition and inflates prices for millions of renters, including tens of thousands in the Atlanta metro region.
The lawsuit, filed under the Sherman Act with Attorneys General of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington, echoes arguments in other complaints against RealPage and landlords.
RealPage’s tech, YieldStar, taps into a database of rental prices and makes recommendations to landlords on how much to charge for rent. By relying on pricing through RealPage’s algorithm, renters have faced increasing prices at a time when the country is in the midst of a housing crisis, according to the Justice Department and other complaints prompted by a 2022 ProPublica investigation into the software.
“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents,” Attorney General Merrick B. Garland said in a statement. “Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability, and the Justice Department will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them.”
The Justice Department filed the lawsuit in federal court in Greensboro, North Carolina. RealPage’s software “tends to maximize price increases, minimize price decreases, and maximize landlords’ pricing power,” officials said in news release. The tech gives landlords little incentive to extend discounts or concessions to their residents, it added.
RealPage spokeswoman Jennifer Bowcock called the Justice Department’s claims a “distraction” from the “fundamental economic and political issues” that led to inflation. She noted that in 2017, the Justice Department had analyzed company information about its property management software “without objecting.”
“RealPage’s revenue management software is purposely built to be legally compliant, and we have a long history of working constructively with the DOJ to show that,” she wrote in a statement. “We believe the claims brought by DOJ are devoid of merit and will do nothing to make housing more affordable. We intend to vigorously defend ourselves against these accusations.”
According to court records, there are about 484,000 multifamily rental units in the Atlanta, Sandy Springs and Alpharetta markets. More than 53% of owners, managers and owner-operators used RealPage’s software in those markets, including Cortland Management and the property management company Pinnacle, according to a complaint filed in Nashville.
Federal government action in the courts has been brewing for months.
In May, the FBI raided the Atlanta offices of Cortland, which owns thousands of units and manages apartment complexes across the US. At that time, Cortland said the raid was part of a criminal probe into “potential antitrust violations in the multifamily housing industry.”
DOJ officials declined to comment on a criminal investigation into the industry during a media briefing on Friday.
At least 25 property management companies in Atlanta have faced civil antitrust allegations in a consolidated complaint against RealPage in Nashville, Tennessee. Prosecutors in D.C. and Arizona are also suing the company in civil court.
Last week, Vice President Harris talked about property management software in the multifamily rental market when she unveiled her plan to support legislation to rein in corporate landlords.
“Some corporate landlords collude with each other to set artificially high rental prices, often using algorithms and price-fixing software to do it. It’s anti-competitive and it drives up costs. I will fight for a law that cracks down on these practices,” Harris said during a policy speech in Raleigh, N.C.
Though price fixing might conjure images of executives conspiring in back rooms, Assistant Attorney General Jonathan Kanter suggested technology had changed the antitrust landscape.
“Throughout this investigation, we learned that the modern machinery of algorithms and AI can be even more effective than the smoke-filled rooms of the past,” he said in prepared remarks.
In a press briefing on Monday, RealPage attorney Stephen Weissman said the complaint was “much milder in its allegations and accusations” than the other lawsuits against the company. He said it was telling that the government did not name any of the landlords who use the software as defendants.
“There’s no allegation in the DOJ lawsuit that customers themselves enter into any collusive agreements with one another,” he added.
Even so, he said the complaint and the government’s theories are flawed.
“You’ve got numerous markets ... and cities across the United States where affordable rent is a policy problem. It has nothing to do with the software,” he said. “It has everything to do with supply and demand, lack of supply of apartment buildings, lack of investment, high interest rates — macro policies that are driving the rent affordability issues in the United States.”
About the Author
