DOJ Sues RealPage Over Alleged Rent-Inflating Algorithm Collusion

The U.S. Department of Justice, along with eight states, has initiated legal action against RealPage, a prominent property management software company. The lawsuit, filed on August 23, 2024, in North Carolina, accuses the Dallas-based firm of facilitating illegal collusion among landlords to artificially inflate apartment rents using algorithmic pricing recommendations.

RealPage, founded in 1998 and managing over 19 million rental units worldwide, is alleged to have created a system where landlords share pricing information through the company's software. This data is then used to generate rent price recommendations, potentially stifling competition and preventing landlords from lowering rents or offering incentives to attract tenants.

The case marks a significant milestone as the Justice Department's first attempt to tackle algorithmic collusion, a growing concern in the antitrust enforcement landscape. Attorney General Merrick Garland stated:

"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."

This legal action comes amid rising housing costs, a key issue for U.S. consumers as the November 2024 presidential election approaches. According to real estate service firm Zillow, home prices have surged by approximately 50% nationally, while rents have increased by around 35% in the past five years.

The Justice Department's complaint cites statements from RealPage executives that allegedly demonstrate awareness of anti-competitive practices. One executive reportedly said, "There is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down."

In addition to the collusion allegations, RealPage faces accusations of illegally monopolizing the U.S. market for multi-family property management software. The company's revenue reached $1.16 billion in 2020, reflecting its significant market presence in an industry expected to be worth $23 billion by 2026.

The lawsuit involves the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington, joining forces with the Department of Justice. This legal action follows similar cases where the Washington D.C. attorney general and renters have accused RealPage of illegally driving up rents.

As the U.S. rental market, valued at over $174 billion annually, grapples with the implications of algorithmic pricing, this case could set a precedent for future antitrust enforcement in the age of big data and artificial intelligence.