Richardson-based RealPage is being sued by the Justice Department over housing prices

The U.S. Department of Justice is suing Richardson-based RealPage for violating antitrust laws by reducing competition among landlords in apartment pricing, following a nearly two-year investigation.

The Justice Department – together with the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington – filed the civil antitrust lawsuit on Friday. It accuses RealPage Inc. of an “illegal scheme to reduce competition among landlords in apartment pricing and to monopolize the market for commercial revenue management software.”

“When the Sherman Act was passed [over a century ago]an anti-competitive scheme would have looked like robber barons shaking hands at a secret meeting,” Attorney General Merrick Garland said in a statement Friday. “Today it looks like landlords are using mathematical algorithms to adjust their rents. But antitrust law will not become obsolete just because competitors find new ways to act together illegally.”

In a statement, RealPage said the Justice Department's allegations were “baseless and do nothing to make housing more affordable.”

“We are disappointed that after many years of investigation and cooperation on the antitrust issues surrounding RealPage, the Department of Justice is now bringing a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years,” the company said.

RealPage came under scrutiny after a 2022 ProPublica investigation into the company's business practices suggested it may be responsible for some of the skyrocketing housing costs. Since then, RealPage has drawn the ire of Democratic lawmakers, including Senator Amy Klobuchar of Minnesota, who introduced a bill in February to ban companies from using algorithms to collude and fix prices. The company also faces several lawsuits from state attorneys general.

And last week, Democratic presidential candidate and Vice President Kamala Harris promised in a speech in Raleigh, North Carolina, a crackdown on “corporate landlords [who] collude to set artificially high rents [by] using algorithms and price-fixing software.”

The lawsuit alleges that RealPage, a property management software company, enters into contracts with competing landlords who agree to share nonpublic, competitively sensitive information about their apartment rents and lease terms with the company in order to train and operate the company's algorithmic pricing software.

The software creates recommendations on prices and other conditions for the participating landlords based on competition-relevant information from the competition, the lawsuit states.

RealPage isn't the only company offering an algorithmic tool to help property managers set pricing, but according to the lawsuit, the company is by far the largest in the industry, controlling 80 percent of the market.

Using data to help property managers set their rents is nothing new and, on its face, illegal. But authorities argue that RealPage is different.

According to lawsuits filed last year by the attorneys general for Arizona and Washington, DC, RealPage uses not only publicly available data but also confidential data that RealPage's customers have agreed to share in confidence to help RealPage's software determine the highest price.

This would amount to illegal price fixing, the authorities say.

The Justice Department alleges that in a free market, these landlords would otherwise compete independently for tenants based on prices, discounts, concessions, lease terms, and other aspects of leasing apartments.

“RealPage also uses this system and its extensive database to maintain its monopoly on the commercial revenue management software market,” the press release said.

The lawsuit seeks to end RealPage's “illegal conduct” and restore competition to the benefit of renters across the country.

Internal documents and affidavits from RealPage and commercial landlords show that their goal was to maximize rental rates and profitability at the expense of tenants, the complaint says.

RealPage acknowledged that its software aims to maximize prices for landlords, and described its products as “taking advantage of every possible opportunity to increase prices,” “avoiding[ing] the race to the bottom in declining markets” and “a rising tide lifts all ships.”

According to the complaint, a RealPage executive said the company's products helped landlords avoid competing on merit, noting, “It's better for everyone to be successful than for us to try to essentially compete against each other in a way that puts the entire industry under pressure.”

“I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and terms,” ​​one landlord said, according to the Justice Department complaint. “This is classic price fixing…”

The Justice Department also alleges that RealPage has unlawfully maintained its monopoly on commercial revenue management software for multifamily properties in the United States, where RealPage has about 80 percent of the market share.

Landlords agree to share their competitive data with RealPage. In return, they receive pricing recommendations and decisions that result from the combination and analysis of their competitors' sensitive data.

This creates a self-reinforcing feedback loop that strengthens RealPage's power over the market and makes it more difficult for honest companies to compete, the complaint says.

Among those celebrating the lawsuits against RealPage is Lee Hepner, legal counsel for the American Economic Liberties Project, an organization that advocates for government action against corporate concentration.

“There is a temptation for courts to ignore this harm because algorithms tend to obscure the existence of an agreement between competitors,” Hepner said. “It's not as simple as an email between competitors setting prices. I think it's very important that our courts treat the use of these software algorithms as if it were another form of price fixing.”