Mandy Rice-Davies Applies

Facing regulatory pressure, RealPage is claiming that it is not an illegal tool to allow collusiion on rents.

If RealPage just reported the rents entered from its clients, it might have a case, but it also requires that its customers follow the recommendations for rents.

Not gonna fly:

RealPage says it isn’t doing anything wrong by suggesting to landlords how much rent they could charge. In a move to reclaim its own narrative, the property management software company published a microsite and a digital booklet it’s calling “The Real Story,” as it faces multiple lawsuits and a reported federal criminal probe related to allegations of rental price fixing.

RealPage’s six-page digital booklet, published on the site in mid-June, addresses what it calls “false and misleading claims about its software”—the myriad of allegations it faces involving price-fixing and rising rents—and contends that the software benefits renters and landlords and increases competition. It also said landlords accept RealPage’s price recommendations for new leases less than 50 percent of the time and that the software recommends competitive prices to help fill units.

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Allegations of price-fixing that may constitute antitrust violations have dogged the software company since late 2022, when ProPublica published an investigation alleging that RealPage’s software was linked to rent rises in some US cities, as the company used private, aggregated data provided by its customers to suggest rental prices. (In response to ProPublica's reporting, RealPage commented that it “uses aggregated market data from a variety of sources in a legally compliant manner.”)

RealPage’s software is powerful because it anonymizes rental data and can provide landlords and property managers with nonpublic and public data about rentals, which may be different from that advertised publicly on platforms like real estate marketplace Zillow. The company contends that it’s not engaging in price-fixing, as landlords are not forced to accept the rents that RealPage’s algorithm suggests. Sometimes it even recommends landlords lower the rent, RealPage claims. But antitrust enforcers have alleged that even sharing private information via an algorithm and using it for price recommendations can be as conspiratorial as back-room handshake deals, even if landlords don’t end up renting apartments at those rates. The reported antitrust investigation is ongoing.

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RealPage’s algorithmic pricing model is among one of the first subject to scrutiny, perhaps due to its involvement in housing, a necessity that has ballooned in price as housing supply languishes. Typical rent in the US is just under $2,000, according to Zillow, up from around $1,500 in early 2020. “Housing affordability is a national problem created by economic and political forces—not by the use of revenue management software,” RealPage says. But renters can’t tell whether their rates are rising because of algorithms or not.

“It’s almost impossible to know if you are just a spectator or a victim,” says Shanti Singh, legislative and communications director with Tenants Together, a California-based coalition of tenants activists. If tenants call a hotline over raised rent or fees, “we’re not necessarily going to be able to see or connect that their landlord is using RealPage.”

The state of Arizona sued RealPage and nine landlords in February, claiming a conspiracy between the company and landlords led renters in Phoenix and Tucson to pay “millions of dollars” more in rent. That followed a similar lawsuit out of Washington, DC. In the capital’s greater metropolitan area, more than 90 percent of rental units in large apartment buildings were priced using RealPage software, according to DC’s attorney general.

The cases against RealPage put algorithmic pricing to the test; as the technology becomes more common, antitrust law has yet to keep pace. Officials have other concerns around algorithms used for alleged hotel price fixing, as well as e-commerce algorithms. “The concern of regulators that algorithms can be used in ways that harm competition—that idea is here to stay,” says Ed Rogers, a partner at law firm Ballard Spahr who focuses on antitrust cases. “RealPage could end up really being a test case, not just for the real estate rental industry but for this aspect of AI and software and its role in a competitive landscape.”

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In June, The New York Times asked Assistant US Attorney General Jonathan Kanter, the Justice Department’s top antitrust official, if he would view an AI tool communicating pricing information as the same as humans colluding, with the question referencing the reported RealPage investigation. Kanter replied: “I often say that if your dog bites somebody, you’re responsible for your dog biting somebody. If your AI fixes prices, you’re just as responsible.”

The Justice Department also last year filed a statement of interest in the RealPage combined class action lawsuit, as the case could become a precedent setter in algorithmic pricing. The statement mirrored Kanter’s argument that the method of price setting doesn’t matter, and algorithms are just the latest evolution in information gathering and sharing.

“In-person handshakes gave way to phone and fax, and later to email. Algorithms are the new frontier,” the Justice Department argued in a statement of interest it filed in the class action lawsuit against RealPage and landlords. “And, given the amount of information an algorithm can access and digest, this new frontier poses an even greater anti-competitive threat than the last.”

Illegal collusion is not a minor side-effect, it is the core business plan for RealPage.

Note that this is a criminal offense.  In the old days, before the 1980s, executives were not infrequently thrown in jail for this behavior.

We need to go old school on RealPage's managers.