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The US Department of Justice has accused a real estate software company owned by private equity firm Thoma Bravo of allowing landlords to use algorithms to collude and keep rent high, as it cracks down on cutting-edge technologies that allegedly enable price fixing.
The DoJ’s civil antitrust lawsuit against RealPage, filed in North Carolina, alleges that competing landlords agreed to share non-public and competitively sensitive information with RealPage about their rental rates, which was then used to train and run the company’s algorithmic pricing software.
The software then recommended what level of rent landlords should charge, based on their rivals’ pricing information, the DoJ said. That eliminated the need for landlords to independently compete to attract renters using discounts and concessions, it said.
RealPage’s pricing software affected around 3mn rented apartment units, the complaint said.
“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,” said US attorney-general Merrick Garland.
“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents,” said Garland. The use of software to share the information did not “immunise” the company from US antitrust laws, he added.
Thoma Bravo bought Texas-based RealPage in a 2020 deal valuing it at $10.2bn, making it one of the biggest leverage buyouts that year. It provides online services for property owners, such as marketing apartments and online billing, and uses an algorithm to screen potential tenants using data on factors including rent-payment history, criminal records and credit scores.
RealPage said it was “disappointed that, after multiple years of education and co-operation on the antitrust matters concerning RealPage, the DoJ has chosen this moment to pursue a lawsuit that seeks to scapegoat pro-competitive technology”.
It added it believed the lawsuit was “merely a distraction from the fundamental economic and political issues driving inflation throughout our economy — and housing affordability in particular — which should be the focus of policymakers in Washington.” Thoma Bravo declined to comment.
US antitrust enforcers have previously signalled their intent to combat the use of algorithms that can result in higher prices or other anti-competitive effects. “Your algorithm can’t do anything that would be illegal if done by a real person,” the Federal Trade Commission explained in a March blog post.
A justice department official said the agency has “brought in exceptional data scientists and technologists” and was “really interrogating the code”.
DoJ officials said that while the algorithm component of the case was “powerful and interesting”, “the bottom line in terms of the harms and impacts . . . is quintessential, heartland antitrust”.
In a statement after the lawsuit was filed, top White House economic adviser Lael Brainard said the administration “has made clear that no one should pay higher prices because of corporate lawbreaking and continues to support fair and vigorous enforcement of the antitrust laws to prevent illegal collusion”.
The DoJ has brought the case alongside the attorneys-general of the states of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon and Tennessee.
Additional reporting by Eric Platt
https://www.ft.com/content/20362015-5f2d-43ef-af9f-b68fa53a135b
