Robo Price-Fixing Exposed: Justice Dept Takes Action Against RealPage for Rent Collusion

Across the United States, millions of households are grappling with the escalating burden of rent. In 2022, a staggering 22.4 million families spent over 30% of their income on rent and utilities, a significant increase from 20.4 million in 2019. The situation has become particularly dire, as 11.6 million households face costs that swallow more than half of their income, marking an all-time high.

Cities like Chicago, Cincinnati, and Washington, D.C. are experiencing rental price surges at double-digit percentages year over year. Various factors contribute to this crisis: high demand, a shortage of low-income housing, rising construction costs, and regulatory restrictions on new multifamily units.

However, a surprising culprit has emerged: the alleged collusion among landlords, facilitated by technology. The U.S. Department of Justice has initiated a lawsuit against RealPage, Inc., claiming the company provides software that enables landlords to engage in price-fixing, an illegal practice that undermines competitive pricing.

The Federal Trade Commission (FTC) defines price-fixing as any agreement among competitors to control the sale prices of goods or services, violating antitrust laws. Such agreements can occur through various means, such as holding prices steady or adhering to a price schedule. The Justice Department asserts that many landlords have crossed this line within the U.S. rental market.

The lawsuit, filed in August 2024, includes eight states and alleges that RealPage’s software compiles nonpublic pricing data from landlords to generate pricing recommendations. This software reportedly encourages users to set prices that exceed market rates, thus exacerbating the financial strain on renters.

Despite landlords having the ability to adjust their pricing, the lawsuit emphasizes that delegating pricing decisions to a common algorithm constitutes illegal coordination. The Justice Department states, “RealPage replaces competition with coordination,” asserting that the company is allowing landlords to collectively manipulate rental prices, ultimately leaving renters to bear the brunt of these practices.

The situation is further complicated by the effectiveness of algorithmic price-fixing. Justice Department antitrust chief Jonathan Kanter remarked that it is “much easier to price-fix when you’re outsourcing it to an algorithm.” This method offers distinct advantages over traditional approaches, enabling landlords to optimize gains and monitor compliance with cartel pricing standards effortlessly.

Since 2022, RealPage has faced more than 30 class action lawsuits regarding its software’s role in potential price-fixing. Federal courts have shown a willingness to entertain these claims, as evidenced by the acknowledgment that a price-fixing agreement could exist purely through the use of RealPage’s system.

Evidence presented in the DOJ complaint reveals landlord awareness of the unlawful price monitoring facilitated by RealPage. “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and terms. That’s classic price-fixing,” one landlord advised. Meanwhile, RealPage contends that it solely aids landlords in making data-driven decisions within a competitive framework, categorically denying any engagement in price-fixing.

The unfolding case against RealPage remains in its early litigation stages. Should the Justice Department prevail, it may prevent the company from continuing its alleged anticompetitive practices, thus impacting the wider rental market and potentially providing relief to beleaguered renters.