A unique lawsuit has been filed against a major real estate software company – and the US Justice Department hopes it will reduce housings costs for millions of renters.
Federal Real Estate Lawsuit
The Department of Justice and eight US states filed a civil antitrust lawsuit on Friday against RealPage, a Dallas-based real estate company that allegedly colluded with landlords to raise rent prices across the country.
Raising Rents Illegally
The lawsuit was filed in a North Carolina court and has accused RealPage of providing US landlords with software that collected sensitive information about renters and rental prices and created an algorithm that helped landlords dictate artificially inflated rent prices.
Using “Confidential” Data
“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents,” said Attorney General Merrick Garland in a statement announcing the lawsuit.
A Disservice to Americans
“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,” he continued.
Driving a Monopoly
The alleged price-fixing software scheme, which was designed to generate price recommendations for landlords, resulted in a major monopoly for these landlords which affected approximately 16 million rental units across the US.
How It Worked
The software did this by showing landlords the maximum rent prices that their competitors were charging, as well as actively helping them to charge tenants the highest rent possible and to find new ways to make money through their rentals.
Cutting Down Competition
It also made competition more difficult for landlords who did not have access to the software algorithm, negatively affecting millions of renters and property owners.
Cornering the Market
RealPage has cornered the market on “revenue management software,” supplying their product to 80% of US landlords who currently use this type of management software.
“Extensive” Impact on the Country
Assistant Attorney General Jonathan Kanter, who also leads the department’s anti-trust division, described the consequences of the company’s actions as “extensive,” largely through contributing to a nationwide cost of living crisis.
The Rent Struggle
Millions of Americans are struggling to cover monthly rental costs, which have risen exponentially since the Covid-19 pandemic.
Exponential Increases
In the last three years, rent prices have risen by an average of 2.61%, according to iPropertyManagement, an online resource for landlords, tenants, and real estate investors.
Outpacing Inflation
While high inflation has raised the price of everything, the rise in rental prices has outstripped currency inflation by 40.7% over the last decade. In the last 3 years, rent prices have increased 169% faster than average wages.
“The Rent is Too Damn High”
AG Garland skewered the company again during a press conference on the issue, where he told reporters “The rent is too damn high, and this is one of the reasons why,” in reference to the company’s actions.
Violation of the Sherman Act
Now, RealPage is being accused of violating parts of the Sherman Act, an 1890 antitrust law that works to prohibit anticompetitive practices and market monopolies in the US. The Justice Department hopes to reduce rent prices for millions of Americans if the lawsuit is successful.
8 States Involved
The attorney generals of California, Colorado, Connecticut, Minnesota, North Carolina, Oregon, Tennessee, and Washington have also joined the lawsuit.
Unique in Some Ways, Typical in Others
While using an AI-powered algorithm as the basis for an antitrust lawsuit is a novel precedent, the actual allegations – of price coordination and price-fixing to cut down competition – are centuries old, according to Deputy Attorney General Lisa Monaco.
“Still Breaking the Law”
“Training a machine to break the law is still breaking the law. Today’s action makes clear that we will use all our legal tools to ensure accountability for technology-fueled anticompetitive conduct,” Monaco said in a statement on the lawsuit.
Two Years of Investigation
Data scientists and researchers hired by Kanter have spent more than two years investigating RealPage and its algorithm – and their findings have been foundational in launching the federal lawsuit.
RealPage Denies All Claims
The Texas real estate company has vehemently denied the Justice Department’s allegations, claiming that it uses all user data legally and responsibly and that its algorithm calculations are just recommendations that users can ignore.
“Built to Be Legally Compliant”
“RealPage’s revenue management software is purposely built to be legally compliant, and we have a history of working constructively with the DOJ to show that,” a RealPage spokesperson told CBS News.
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