“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” Attorney General Merrick Garland said on Friday.
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RealPage is now within the sights of the U.S. Department of Justice.
The DOJ and eight state attorneys general filed a lawsuit on Friday accusing RealPage of operating as the center of an illegal scheme to drive up the price of rent in cities across the country.
The new lawsuit, filed in the U.S. District Court for the Middle District of North Carolina is only the latest challenge against a company that uses advanced technology and cooperation from some of the country’s largest landlords to adjust rent prices in near real-time, but it’s the first major antitrust suit to take direct aim at an algorithm, according to The New York Times.
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“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” Attorney General Merrick Garland said in a statement Friday. “We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents. 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.”
RealPage, which is owned by the private equity firm Thoma Bravo, has denied wrongdoing in previous lawsuits filed by renters and in Washington D.C., and again in a statement to Inman on Friday.
“We are disappointed that, after multiple years of education and cooperation on the antitrust matters concerning RealPage, the DOJ has chosen this moment to pursue a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years,” RealPage spokeswoman Jennifer Bowcock said in a statement. “It is merely a distraction from the fundamental economic and political issues driving inflation throughout our economy – and housing affordability in particular – which should be the focus of policymakers in Washington, D.C.”
Bowcock noted that the DOJ had previously reviewed RealPage’s acquisition of one of its companies in 2017 and cleared the transaction of antitrust concerns.
“We believe the claims brought by DOJ are devoid of merit and will do nothing to make housing more affordable,” Bowcock said. “We intend to vigorously defend ourselves against these accusations.”
In some ways, the lawsuit is timely. RealPage sold its software to landlords as a way to beat down markets, feeding them data to help them set the highest possible rent despite potential urges to drop the price to fill units.
The country is now on its way out of a period where apartment construction was the highest its been in four decades. That has driven up vacancy rates in some markets, testing landlords’ ability to compete with other landlords also trying to fill new and vacant buildings.
“A free market requires that landlords compete on the merits, not coordinate pricing,” the complaint reads. “Landlords should win renters by offering whatever combination of price and quality they think is most attractive.”
The DOJ and attorneys general are seeking an injunction to stop RealPage from implementing its information-sharing framework and to stop what they said was the company’s monopoly.
Using some of RealPage’s own marketing language to outline the firm’s pitch to some of America’s biggest landlords, the DOJ said RealPage had created a way to avoid competing with each other.
“Renters are entitled to the benefits of vigorous competition among landlords. In prosperous times, that competition should limit rent hikes; in harder times, competition should bring down rent, making housing more affordable,” the complaint reads. “RealPage has built a business out of frustrating the natural forces of competition.”
“RealPage replaces competition with coordination. It substitutes unity for rivalry. It subverts competition and the competitive process. It does so openly and directly—and American renters are left paying the price.”
Read the full complaint here (refresh if you have trouble viewing):
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