{"id":38144,"date":"2024-11-18T13:45:00","date_gmt":"2024-11-18T13:45:00","guid":{"rendered":"https:\/\/www.lifeandnews.com\/articles\/?p=38144"},"modified":"2024-11-19T05:44:21","modified_gmt":"2024-11-19T05:44:21","slug":"robo-price-fixing-why-the-justice-department-is-suing-a-software-company-to-stop-landlords-colluding-on-rents","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/robo-price-fixing-why-the-justice-department-is-suing-a-software-company-to-stop-landlords-colluding-on-rents\/","title":{"rendered":"Robo price-fixing: Why the Justice Department is suing a software company to stop landlords colluding on rents"},"content":{"rendered":"\n

Roger Alford<\/a>, University of Notre Dame<\/a><\/em><\/p>\n\n\n\n

Of all the reasons it could be hard to pay rent each month, did you have an algorithm-powered illegal cartel on your list?<\/p>\n\n\n\n

Millions of people across the United States are paying far more rent than they can reasonably afford, with rental housing prices rising far quicker than household income<\/a>. In 2022, 22.4 million U.S. households were spending more than 30% of their income<\/a> on rent and utilities, up from 20.4 million in 2019.<\/p>\n\n\n\n

Many of these households faced severe cost burdens, with an all-time high of 11.6 million struggling with housing costs that consume more than half of their income<\/a>. In Chicago, Cincinnati, Minneapolis, Virginia Beach and Washington, year-over-year rental prices are climbing at double-digit rates<\/a>.<\/p>\n\n\n\n

Several factors drive the high cost of rentals<\/a>, including increasing demand, a dwindling supply of low-rent units, the rising cost of capital to build new rentals, and regulatory barriers restricting the construction of multifamily units.<\/p>\n\n\n\n

But there\u2019s another surprising factor driving up rental prices: landlords colluding with the help of technology. The U.S. Justice Department is suing<\/a> the company RealPage, Inc.<\/a>, accusing it of selling software to landlords that allows them to collectively set prices \u2013 the illegal practice of price-fixing. As a former official in the Justice Department\u2019s Antitrust Division and a law professor<\/a>, I\u2019ve been following the case closely.<\/p>\n\n\n\n

The perils of price-fixing<\/h2>\n\n\n\n

The Federal Trade Commission defines price-fixing<\/a> as an agreement, conspiracy or combination among competitors to raise, fix or otherwise maintain the price at which their goods or services are sold.<\/p>\n\n\n\n

Any agreement<\/a> that restricts price competition violates the antitrust laws. Examples of price-fixing agreements include commitments among competitors to hold prices firm, adopt a standard formula for computing prices, or adhere to a minimum fee or price schedule.<\/p>\n\n\n\n

So when competitors share proprietary, confidential current price information \u2013 directly or indirectly through an intermediary \u2013 to stabilize or control industry pricing, they have crossed the line<\/a> into illegal collusion, according to the FTC. That is the case in major portions of the U.S. rental market, the Justice Department argues.<\/p>\n\n\n\n

One algorithm for all<\/h2>\n\n\n\n

In August 2024, the Justice Department and eight states filed a lawsuit in a federal court in North Carolina against RealPage. The Justice Department accused the company of selling software to landlords that collects nonpublic information from competing landlords and uses that combined information to make pricing recommendations.<\/p>\n\n\n\n

\"two
Attorney General Merrick Garland, Deputy Attorney General Lisa Monaco and Acting Associate Attorney General Benjamin Mizer at a news conference about the Justice Department suing RealPage on Aug. 23, 2024. AP Photo\/Mark Schiefelbein<\/a><\/figcaption><\/figure>\n\n\n\n

Landlords who use the software input the rental prices they charge, and the software aggregates all the data from the company\u2019s customers. The software\u2019s algorithm then makes recommendations for what to charge. The recommendations are generally higher than the current market rate<\/a>, and most customers take the recommendations<\/a>, which push prices in a market higher.<\/p>\n\n\n\n

Even if landlords retain some authority to deviate from the algorithm\u2019s recommendations, it is illegal for competing landlords to jointly delegate key aspects of their pricing to a common algorithm, according to the Justice Department suit<\/a>. The Justice Department declared that<\/a> \u201cRealPage replaces competition with coordination. It substitutes unity for rivalry. It subverts competition and the competitive process. It does so openly and directly \u2013 and American renters are left paying the price.\u201d<\/p>\n\n\n\n

The case is unusual in that, unlike a typical price-fixing cartel, the landlords used RealPage\u2019s algorithms to dramatically improve their ability to engage in price-fixing. Algorithmic price-fixing is typically easier and more effective than other types of cartel behavior. The software can easily aggregate massive amounts of proprietary data, optimize cartel gains, monitor real-time deviations from cartel pricing and minimize incentives to cheat.<\/p>\n\n\n\n

\u201cIt\u2019s much easier to price-fix when you\u2019re outsourcing it to an algorithm<\/a> versus when you\u2019re sharing manila envelopes in a smoke-filled room,\u201d Justice Department antitrust chief Jonathan Kanter told The New York Times.<\/p>\n\n\n\n

Since 2022, RealPage and various property managers have been named as defendants in more than 30 class action lawsuits<\/a> alleging the RealPage software is used to unlawfully fix rental prices. Federal courts tend to be sympathetic to such arguments, as shown in the denial of a motion to dismiss the case in one of the private lawsuits<\/a> filed against RealPage.<\/p>\n\n\n\n

In that case, the court held that a price-fixing agreement could exist<\/a> as a matter of law. Landlords provided RealPage\u2019s algorithmic system with their proprietary commercial data, knowing that RealPage would require the same from their competitors and would use all of that data to recommend rental prices to all of the company\u2019s clients. https:\/\/www.youtube.com\/embed\/TIvqb_-eKWQ?wmode=transparent&start=0 A news report summarizes the government\u2019s case against RealPage.<\/p>\n\n\n\n

Classic price-fixing or data-driven decisions?<\/h2>\n\n\n\n

Some landlords seem to be aware that in sharing confidential price information to RealPage\u2019s software, they were facilitating the unlawful monitoring and raising of rental prices. The Justice Department complaint quoted a landlord<\/a> commenting on RealPage\u2019s software, \u201cI always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That\u2019s classic price-fixing.\u201d<\/p>\n\n\n\n

Even RealPage\u2019s own executives have boasted that when landlords collectively use their software, they can use \u201cevery possible opportunity to increase price<\/a>,\u201d according to the complaint.<\/p>\n\n\n\n

RealPage argued that its software \u201csimply helps landlords make data-driven decisions<\/a>\u201d in a competitive market. The company claims its tools are designed to reflect market conditions and optimize occupancy rates, not to engage in price-fixing.<\/p>\n\n\n\n

The company describes the impact of its alleged collusion with landlords as \u201ca rising tide [that] raises all ships<\/a>.\u201d Perhaps a better description for their service is a rising tide that raises all ships for those who have one.<\/p>\n\n\n\n

The Justice Department\u2019s case and the private cases are in the early stages of litigation. If the department is successful, RealPage will be barred from engaging in the anticompetitive practices related to helping landlords share proprietary pricing information.<\/p>\n\n\n\n

Roger Alford<\/a>, Professor of Law, University of Notre Dame<\/a><\/em><\/p>\n\n\n\n

This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Roger Alford, University of Notre Dame Of all the reasons it could be hard to pay rent each month, did you have an algorithm-powered illegal cartel on your list? Millions of people across the United States are paying far more rent than they can reasonably afford, with rental housing prices rising far quicker than household […]<\/p>\n","protected":false},"author":56,"featured_media":38145,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[5,277,46,295,25,27,4],"tags":[9088,885,891,886,860,9587,15752,15753,5170,10980,15152],"_links":{"self":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/38144"}],"collection":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/users\/56"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/comments?post=38144"}],"version-history":[{"count":1,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/38144\/revisions"}],"predecessor-version":[{"id":38146,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/38144\/revisions\/38146"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media\/38145"}],"wp:attachment":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media?parent=38144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/categories?post=38144"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/tags?post=38144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}