DOJ Files Antitrust Suit Against RealPage, Alleging Price-Fixing
After a nearly two-year probe, the U.S. Department of Justice filed suit Friday against multifamily software company RealPage for allegedly helping landlords artificially raise apartment rents across the U.S. in violation of the Sherman Antitrust Act.
North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington joined the DOJ civil suit that accuses RealPage of harming renters by colluding with apartment landlords to unfairly establish rents.
“When the Sherman Act was passed, an anticompetitive scheme might have looked like robber barons shaking hands at a secret meeting. Today, it looks like landlords using mathematical algorithms to align their rents,” U.S. Attorney General Merrick Garland said in a statement. “But antitrust law does not become obsolete simply because competitors find new ways to unlawfully act in concert. And Americans should not have to pay more in rent simply because a company has found a new way to scheme with landlords to break the law.”
While rent growth has slowed in the past few months, rent prices in the U.S. are more than 33% higher than before the pandemic, according to Zillow data reported by Nerdwallet.
RealPage has maintained there is nothing illegal or improper about its YieldStar platform, which collects proprietary data from landlords to help suggest and set rents on apartment units.
RealPage spokesperson Jennifer Bowcock told the New York Times, which was the first to report on the DOJ's plans, that its software is “purposely built to be legally compliant,” and that the firm has “a history of working constructively with the D.O.J.” when it acquired rival software provider LRO in 2017. The merger faced the department’s antitrust scrutiny but was ultimately approved.
Bisnow has reached out to RealPage for comment.
RealPage is owned by private equity firm Thoma Bravo, which declined to comment to the NYT.
The DOJ alleges that RealPage helps landlords “sidestep” market rent competition by submitting their “most sensitive, non-public” apartment performance metrics every day, which are then fed to an algorithm that provides landlords with suggested rental rates, often automatically updating the prices for landlords, Garland said. Garland also accused RealPage of policing whether landlords accept those rent suggestions and preventing landlords from offering concessions.
“Landlords understand what their arrangement with RealPage gets them. As one said, ‘I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and terms. That’s classic price fixing,’” Garland said in the statement.
In June, RealPage pushed back against what it described as a “false narrative” and denied many of the allegations on how it uses YieldStar. It said landlords can follow their own recommendations and that RealPage serves a much smaller portion of the multifamily market than is perceived.
RealPage CEO Dana Jones said “housing affordability should be the real focus,” including how zoning and higher mortgage rates affect supply.
It is unclear how the probe, which turned into a criminal inquiry in March, has impacted RealPage, although the firm earlier this year announced plans to lay off around 260 of its more than 6,500 global employees.
The DOJ probe also ensnared Atlanta-based Cortland Management, which was raided by the FBI under a limited search warrant on May 22 in connection with antitrust violations in the multifamily industry.
