RealPage Accused of Price-Fixing Rental Rates Through AI-Powered Software: A Blow to Competition and Affordable Housing
The U.S. Department of Justice (DOJ), in a landmark antitrust suit, has accused RealPage, a major real estate software company, of colluding with landlords to manipulate rental prices. The lawsuit, filed in a North Carolina federal court, alleges that RealPage’s algorithms, fueled by non-public information about rental rates and lease terms, have been used to artificially inflate rents across the country. This alleged price-fixing scheme, according to the DOJ, has stifled competition between landlords and burdened tenants with higher housing costs.
The Antitrust Complaint: RealPage’s Algorithm Accused of Being a Tool for Price-Fixing
The complaint details a system where RealPage’s software, including its Artificial Intelligence Rental Manager (AIRM) and YieldStar algorithms, recommends rent increases based on sensitive data gathered from competing landlords. This data, according to the suit, allows the algorithms to predict likely price points and manipulate landlords into adopting similar pricing strategies, effectively undermining competition.
"Training a machine to break the law is still breaking the law," said Deputy Attorney General Lisa Monaco, highlighting the unprecedented nature of the lawsuit. The complaint cites internal communication between RealPage executives and landlords, allegedly demonstrating a deliberate intent to circumvent antitrust laws. One landlord, quoted in the complaint, stated: "I always liked this product [AIRM] because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing….”
Impact on Rental Prices: A Vast Influence Across the Country
The lawsuit also highlights the scale of RealPage’s influence on the rental market. Between January 2017 and June 2023, over 85% of final floor plan prices set by landlords nationwide were reportedly within 5% of the prices recommended by RealPage’s algorithms. The suit goes further, accusing the company of automatically accepting recommended price increases through default features designed to make price fixing effortless. "By enabling auto-accept, a landlord functionally delegates pricing authority to Real Page," according to the lawsuit.
RealPage Responds: "Purposely Built to Be Legally Compliant"
In response to these allegations, a RealPage spokesperson stated that the company’s software was "purposely built to be legally compliant." This claim stands in direct opposition to the DOJ’s evidence, which includes internal communications and data analysis demonstrating a clear connection between RealPage’s algorithms and price increases.
The Implications for Renters and the Housing Market
The DOJ’s lawsuit against RealPage has far-reaching implications for the rental market and tenants across the country.
- Impact on Affordability: The alleged price-fixing scheme by RealPage could have directly contributed to rising rental costs, making it increasingly difficult for renters to find affordable housing.
- Competition and Innovation: The lawsuit seeks to restore competition in the rental market, ultimately benefitting consumers by preventing landlords from colluding to inflate prices.
- AI and Antitrust: This case presents a critical test of how antitrust law applies to the use of Artificial Intelligence in business practices. The complaint alleges that RealPage used AI to facilitate illegal, coordinated pricing activity.
The Future of the Case
The suit, joined by the attorneys general of eight states, represents a major legal challenge to RealPage’s business practices. The outcome of this case will have significant ramifications for the real estate industry and the use of AI in business operations.
Key Takeaways:
- The DOJ’s lawsuit against RealPage marks a significant development in the fight against antitrust violations and the regulation of AI in business.
- The allegations of price-fixing using AI-powered algorithms raise concerns about the potential for unintended consequences and the need for increased scrutiny of these technologies.
- The case emphasizes the importance of robust competition in the rental market and the need to protect consumers from unfair pricing practices.
This case has the potential to reshape the relationship between technology, antitrust law, and the affordability of housing, making it a landmark case with substantial implications for the future of the real estate industry.
