DOJ Considering Possible Lawsuit Against Housing Software Company RealPage
In an effort to reign in the cost of housing and companies who have played a hand in inflated prices, the Department of Justice is preparing a potential lawsuit against Texas-based property management software company, RealPage.
In a criminal investigation conducted by the DOJ, officials say RealPage is helping facilitate price-fixing among some of its clients, including large residential property owners and management firms. These allegations were reported to the DOJ by two anonymous sources who are close to the matter, according to a Politico report.
According to officials, the company is engaging in a relatively new practice dubbed algorithmic price fixing. With the use of technology, competition in the rental space is dwindling due to the largest players conspiring to charge the highest rents possible.
RealPage’s software, including its popular YieldStar product, is a tech tool purchased by landlords that helps them estimate supply and demand for their rental units. This software utilizes nonpublic data, most of which is submitted to the company through its property management clients.
This data is used in conjunction with statistical models to offer approximate values to landlords who use the company’s software, allowing them to leverage current data to price their units at the highest price points possible.
According to the Justice Department, this algorithmic software is nothing but a shield over what are essentially antitrust practices. This exchange of what is otherwise sensitive pricing data is made available to the biggest players in the game, allowing rivals access to price points they would have otherwise been unaware of.
This is not the first time RealPage has been in the spotlight for its products and its alleged anticompetitive practices. RealPage and its private equity owner, Thoma Bravo, have faced and settled several other class action lawsuits that have been brought on by renters.
Last year, D.C. Attorney General Brian Schwalb filed a lawsuit against RealPage, claiming renters were subjected to higher prices because of anti-competitive pricing. Schwalb explains, “RealPage and the defendant landlords illegally colluded to artificially raise rents by participating in a centralized, anticompetitive scheme, causing District residents to pay millions of dollars above fair market prices.” He adds, “Defendants’ coordinated and anticompetitive conduct amounts to a District-wide housing cartel.” According to the lawsuit, over 50,000 apartments were subjected to this unfair pricing.
Both the company and clients of RealPage pushed back against this lawsuit and others, saying that there is no evidence of collusion other than clients all subscribing to the available software.
A spokeswoman for the company, Jennifer Bowcock, has responded to the news of the anticipated lawsuit, sharing a statement with Politico that explained in part, “RealPage’s revenue management software is purposely designed and built to be legally compliant, and we have a history of working constructively with the Department of Justice to show that.” Bowcock adds, “In fact, in 2017 the DOJ analyzed extensive information about YieldStar and when it granted antitrust clearance for RealPage’s acquisition of LRO without objecting to the nature of our revenue management products.”
Despite their defense, the Justice Department is expected to bring forward a lawsuit by the end of summer.
