News Analysis
Editor’s note: This article uses the term ‘algorithm’ which, in its simplest form, is a set of instructions designed to accomplish a task. In recent years, a property management software company, known as RealPage, has developed an algorithm – used by big landlords throughout the U.S. – to analyze vast quantities of data, including competitor information. The software recommends, or even automatically sets, rental prices higher than found in a truly competitive market.
Greystar Management Services, is the largest landlord in the United States, managing almost 950,000 rental units across the country. U.S. prosecutors allege that Greystar and other landlords — including five co-defendants — shared competitively sensitive data to generate pricing recommendations using RealPage’s algorithms.
This collusion among landlords violates federal antitrust laws. Landlords discussed competitively sensitive topics to fix prices and harm renters. In a free market, these landlords would otherwise be competing independently to attract renters based on pricing, discounts, concessions, lease terms, and other dimensions of apartment leasing. One prosecutor accurately described the process:
“By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has found a modern way to violate a century-old law through systematic coordination of rental housing prices — undermining competition and fairness for consumers in the process. Training a machine to break the law is still breaking the law. These are illegal schemes and practices aimed at empowering corporate interests at the expense of consumers.”
The complaint cites internal documents and sworn testimony from RealPage and commercial landlords that make plain RealPage’s and landlords’ objective to maximize rental pricing and profitability at the expense of renters. For example:
- RealPage acknowledged that its software is aimed at maximizing prices for landlords, referring to its products as “driving every possible opportunity to increase price,” “avoid[ing] the race to the bottom in down markets,” and “a rising tide raises all ships.”
- A RealPage executive observed that its products help landlords avoid competing on the merits, noting that “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.”
- A RealPage executive explained to a landlord that using competitor data can help identify situations where the landlord “may have a $50 increase instead of a $10 increase for the day.”
- Another landlord commented about RealPage’s product, “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing…”
RealPage’s software tends to maximize price increases, minimize price decreases, and maximize landlords’ pricing power. RealPage also trained landlords to limit concessions (e.g., free month(s) of rent) and other discounts to renters. The complaint also cites internal documents from RealPage and landlords touting the fact that landlords have responded by reducing renter concessions.
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