The Justice Department and attorneys general from eight states filed an antitrust lawsuit Friday against rental software company RealPage, accusing it of using algorithms to jack up rent prices nationwide. The suit alleges that RealPage’s software, YieldStar, collects confidential information from landlords and rental companies, which feeds algorithms that recommend prices and practices that limit competition and force renters to pay more.
“Americans should not have to pay more in rent because a company found a new way to conspire with landlords to break the law,” said Attorney General Merrick Garland. wrote in a Department of Justice press release.
RealPage Software reportedly RealPage manages more than 24 million rental units worldwide. The Justice Department’s complaint accuses the Texas-based company of hiring competing landlords who agree to share “confidential and nonpublic information” about rental rates and other lease terms. RealPage then trains YieldStar’s algorithms, which generate pricing and other competitive recommendations “based on its and its rivals’ confidential information,” according to the Justice Department.
The Justice Department was joined in the lawsuit by attorneys general from North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington. The lawsuit was filed in the U.S. District Court for the Middle District of North Carolina, accusing the company of violating Sections 1 and 2 of the Sherman Act. The 1890 law is considered the cornerstone of antitrust actions in the United States.
The suit further accuses RealPage of monopolizing the rental market in a feedback loop that “strengthens RealPage’s control of the market,” making it harder for “honest companies to compete on the merits.”
The Justice Department complaint cites internal documents and sworn testimony from the company, along with that of landlords who have used the software to allegedly defraud tenants. The agency says RealPage admitted that its software was designed to maximize rental prices, and that its product excels at “taking advantage of every possible opportunity to increase price,” “avoiding the race to the bottom in down markets,” and “a rising tide lifts all boats.”
In addition, the Justice Department quotes a RealPage executive who says its software helps landlords avoid competition. The executive reportedly opined that “there is a greater good in everyone succeeding rather than trying to compete with each other in a way that actually keeps the entire industry in ruin.” (Perhaps the executive does not consider tenants to be part of the “greater good.”)
The DOJ also cites a RealPage executive who explained to a landlord that data from its competitors can help detect situations where “they can have a $50 increase instead of a $10 increase per day.” The complaint even cites one landlord’s comment that YieldStar helps the supply side monitor the market. “I always liked this product because their algorithm uses proprietary data from other subscribers to suggest rents and terms. That’s classic price fixing…”
