The issue of rising apartment prices in the US has been a contentious topic in recent years. Many renters have felt like the system is rigged, with prices seemingly increasing in lockstep across different buildings and cities. A recent civil lawsuit filed by the US Department of Justice has shed light on a possible culprit behind this trend – RealPage, a Texas-based company that provides commercial revenue management software for landlords. The lawsuit alleges that RealPage’s algorithm is being used to coordinate pricing among landlords, effectively hindering competition in the rental market.
According to the DOJ lawsuit, RealPage’s software allows landlords to input rental rates and lease terms, which are then used to generate a suggested price for apartments. This process, the lawsuit claims, enables systematic coordination of rental housing prices, in violation of antitrust laws. RealPage reportedly holds an 80 percent market share in this type of software, impacting around 3 million rental units nationwide. The lawsuit marks a significant escalation in legal action against the company, with the DOJ and attorneys general from eight states coming together to challenge RealPage’s practices.
RealPage’s algorithmic pricing system gained attention following a 2022 investigation by ProPublica, which detailed how the company’s software, YieldStar, operates. The lawsuit represents a significant step by the DOJ, as it focuses on the algorithm itself as the primary tool for anticompetitive behavior. This is a departure from previous cases where individuals were charged for price-fixing using algorithms, rather than the algorithms themselves being the target of legal action.
In response to the allegations, RealPage has vehemently denied any wrongdoing, with executives emphasizing the benefits of their software for both housing providers and residents. The company has gone as far as publishing a digital pamphlet and FAQ page to address what they deem to be misinformation. However, the DOJ remains firm in its stance that algorithms, including RealPage’s, are subject to the same legal standards as any other business practice. Attorney General Lisa Monaco stressed that algorithms cannot operate in a law-free zone, highlighting the importance of upholding antitrust laws in the digital age.
The lawsuit against RealPage underscores the challenges posed by the use of algorithms in pricing. While these tools can offer efficiency and convenience, they also have the potential to distort markets and harm consumers. As the case unfolds, it will be crucial to consider how to regulate algorithmic pricing to ensure fair competition and protect the interests of renters. The outcome of this legal battle could set a precedent for future cases involving the use of algorithms in various industries, highlighting the importance of vigilance in addressing the ethical implications of advanced technology.
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