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The Department of Justice and eight states on Friday sued the maker of rent-setting software that critics blame for sending rents soaring in apartment buildings across the country.
The civil lawsuit, filed in federal district court in Greensboro, North Carolina, accuses Texas tech company RealPage of taking part in an illegal price-fixing scheme to reduce competition among landlords so they can boost prices — and profits. It also alleges the company took over the market for such price-setting software, effectively monopolizing it.
“RealPage has built a business out of frustrating the natural forces of vigorous competition,” said Assistant Attorney General Jonathan Kanter at a news conference Friday with top department officials. “The time has come to stop this illegal conduct.”
The antitrust lawsuit is the latest — and most dramatic — development to follow a 2022 ProPublica investigation that examined RealPage’s role in helping landlords set rent prices across the country, an arrangement that legal experts said could result in cartel-like behavior. Since then, senators have introduced legislation seeking to ban such practices, tenants have filed dozens of ongoing federal lawsuits, and San Francisco’s Board of Supervisors moved to bar landlords from using similar algorithms to set rents.
Justice Department officials said Friday that their lawsuit followed a nearly two-year investigation into the company. Along with traditional approaches, such as examining internal records, they said their probe involved data scientists who dug into computer code to understand how these algorithms set prices.
RealPage’s software enables landlords to share confidential data and charge similar rents, the officials said.
“We learned that the modern machinery of algorithms and AI can be even more effective than the smoke-filled rooms of the past,” Kanter said, referring to artificial intelligence. “You don't need a Ph.D. to know that algorithms can make coordination among competitors easier.”
The case has become central to the Justice Department’s efforts to jumpstart antitrust enforcement under the Biden White House. Officials said they are also scrutinizing similar information-sharing exchanges in other industries, including meat processing. “Training a machine to break the law is still breaking the law,” Deputy Attorney General Lisa Monaco said.
But experts say that prosecutors face challenges in applying the more than 100-year-old Sherman Antitrust Act to situations in which competitors rely on new technologies to coordinate their prices.
RealPage, which is owned by the private equity company Thoma Bravo, did not immediately respond to ProPublica’s request for comment. It has previously denied wrongdoing. In a statement published on its website in June, the company said its landlord clients are free to accept or reject its advice and that its impact on the national rental market is smaller than portrayed by the software’s critics.
“RealPage uses data responsibly, including limited aggregated and anonymized nonpublic data where accuracy aids pro-competitive uses,” the company’s statement said. It has previously said it will fight antitrust litigation.
The DOJ’s suit does not name landlords as defendants, unlike the complaints filed by tenants, which accused some of the biggest landlords in the country of price-fixing through RealPage. In May, the FBI raided an Atlanta-based landlord involved in the lawsuits. The landlord said it was not law enforcement’s target. DOJ officials declined to answer a question about why their lawsuit did not name landlords, with Kanter saying he “can’t comment on any further investigations.”
The DOJ complaint, which is more than 100 pages long, quotes RealPage executives and landlords speaking about the impact of the software. The lawsuit alleges that the company’s software works by helping landlords realize that if they all raise prices, or fail to drop them during a downturn, “a rising tide raises all ships.”
“I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term,” one landlord commented about the product, according to the lawsuit. “That’s classic price fixing.”
Justice Department officials said the software has had a “substantial” impact on the housing market. It is used to set rent for more than three million apartments nationwide, Kanter said, and it draws on competitively sensitive information from over 16 million units. Americans spend more on housing than any other expense, officials 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,” Attorney General Merrick Garland said at the news conference.
ProPublica’s story found that in one Seattle neighborhood, 70% of all multifamily apartments were overseen by just 10 property managers — every single one of whom used pricing software sold by RealPage. The company claimed its software could help landlords “outperform the market” by 3% to 7%.
Justice officials alleged that RealPage “polices” landlords’ compliance with its recommendations. Its software has an “auto-accept” setting, which allows landlords to automatically adopt its suggestions and “effectively permits RealPage to determine the price a renter will pay,” Garland said.
The states whose attorneys general have joined the federal lawsuit are North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington.
Meanwhile, housing costs have emerged as a political issue in the presidential election, as the candidates travel the country making their cases.
Last week, Vice President Kamala Harris, the Democratic nominee for president, criticized landlords’ use of price-setting software to determine rents.
“Some corporate landlords collude with each other to set artificially high rental prices, often using algorithms and price-fixing software to do it,” she said. “It’s anticompetitive, and it drives up costs.”
This content originally appeared on ProPublica and was authored by by Heather Vogell.