The apartment rental market in the US has been under scrutiny in recent years, with many renters feeling like the game is rigged. Prices seem to consistently increase not only in their own building but also across the city. A new civil lawsuit filed by the US Department of Justice sheds light on the possible reason behind this phenomenon – an algorithm used by a single company called RealPage.
The Allegations
RealPage, a Texas-based firm that provides commercial revenue management software for landlords, is accused of using its algorithm to facilitate price-fixing among its clients. Landlords input rental rate and lease terms into the system, and the algorithm then suggests prices that promote coordination and discourage competition. According to the DOJ, this practice violates antitrust laws and harms both renters and the industry as a whole.
RealPage controls a significant portion of the market for this type of software, covering around 80 percent of the market. This software is used to set prices for approximately three million rental units across the country. The company has already faced legal action in multiple states, including Arizona and Washington, DC, where it is allegedly used to price more than 90 percent of units in large apartment buildings.
The DOJ lawsuit marks a new era of legal action against companies using algorithms for price-fixing. While criminal charges have been filed in the past against individuals involved in price-fixing schemes, this is the first civil action where the algorithm itself is at the center of the violation. RealPage executives have been quoted acknowledging the anticompetitive nature of their product, further strengthening the case against the company.
RealPage has vehemently denied any allegations of antitrust violations, going as far as publishing digital pamphlets and FAQ pages defending their products. The company claims that its revenue management software benefits both housing providers and residents. However, the DOJ stands firm in its stance that algorithms are not above the law and that companies utilizing them for price-fixing will be held accountable.
The case against RealPage highlights the dark side of algorithmic pricing in the apartment rental industry. While technology can bring efficiency and innovation, it can also be used to manipulate markets and harm consumers. As the legal battle unfolds, it will be crucial to hold companies accountable for their actions and ensure fair competition in the rental market.