Angel Santana Garcia
11:22 AM ET: Updates with Justice Department’s announcement of suit and updates stock action in last paragraph.
The U.S. Department of Justice filed an antitrust suit against RealPage (RP), alleging that the company’s apartment software engages in illegal price-fixing facilitated by algorithms, violating the Sherman antitrust act.
While price-fixing at the turn of the 20th century involved robber-barons colluding in smoke-filled rooms, “today, it looks like landlords using algorithms to raise rents,” Attorney General Merrick Garland said during a press conference on Friday.
The complaint alleges that RealPage contracts with competing landlords who agree to share with the company nonpublic, competitively sensitive information about their apartment rental rates and other lease terms to train and run RealPage’s algorithmic pricing software. In a free market, the landlords would be competing independently to attract renters based on pricing, discounts, concessions, lease terms, and other aspects of apartment leasing, the DOJ alleged.
“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents,” Garland added.
Earlier, the New York Times reported that the DOJ planned to file the complaint as soon as Friday, alleging that its software reduces competition among landlords in apartment pricing.
California, Colorado, Minnesota, North Carolina, Washington, and other states joined the suit.
“By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has found a modern way to violate a century-old law through systematic coordination of rental housing prices — undermining competition and fairness for consumers in the process,” said Deputy Attorney General Lisa Monaco. “Training a machine to break the law is still breaking the law.”
In July, Politico reported that the Justice Department was working on a lawsuit against the company. At that time, a RealPage spokesperson said that the DOJ reviewed its LRO and YieldStar products in 2017 and didn’t object to any feature of the products.
Its revenue management products are “fundamentally the same today” as they were in 2017, the spokesperson added.
Apartment REIT stocks don’t appear to be fazed by the report in Friday morning trading. AvalonBay (NYSE:AVB) +1.4%, Equity Residential (NYSE:EQR) +1.5%, Independence Realty Trust (NYSE:IRT) +2.4%, Camden Property Trust (NYSE:CPT) +2.1%, and Mid-America Apartment Communities (NYSE:MAA) +1.5%.
