Unpacking the U.S. v. RealPage: A Deep Dive into Allegations of Anti-Competitive Practices
In a significant legal development, the United States Department of Justice, along with several states, has filed a complaint against RealPage Inc., a leading provider of revenue management software for the real estate industry. The lawsuit, filed on August 23, 2024, accuses RealPage of engaging in anti-competitive practices that have far-reaching implications for the multifamily property market. Here’s a closer look at the key details and allegations outlined in the complaint.
Background on RealPage and Its Software
RealPage offers sophisticated revenue management software, including AIRM (Automated Integrated Revenue Management) and YieldStar. These tools are designed to optimize rental pricing by leveraging data analytics.
On the surface, RealPage seems to balance supply and demand in the region where a rental property is located and suggest a price that optimizes profit. Numerous software solutions claim to perform these same calculations.
What makes RealPage different?
The DOJ’s complaint identifies several factors encouraging coordination among competitors, pressuring users to comply with price recommendations, and sharing nonpublic, competitively sensitive Information that could result in price fixing.
Price fixing is defined in case law as an agreement among competitors to raise, lower, or stabilize prices. The U.S. Supreme Court has consistently held that price-fixing agreements are illegal per se, meaning they are automatically deemed unlawful regardless of any justification or reasoning behind them.
How does RealPage work?
To understand the allegations against RealPage, we need a basic understanding of how the software works.
Landlords who use RealPage services agree to allow RealPage to use information that would normally be considered confidential to individual landlords, including rents, occupancy data, and pricing strategies. RealPage uses this information to determine the highest rent price with enough occupancy to generate profit in the community where the landlord user's property resides.
All of the landlord user’s in the region are provided the same rent price. In this way, the software’s design makes it easier for landlords to align their pricing strategies, rather than competing independently.
RealPage employs various mechanisms to ensure landlords comply with its pricing recommendations. The software makes it easier to accept these recommendations than to decline them, and RealPage’s pricing advisors play an active role in encouraging landlords to follow the suggested prices. According to the DOJ, RealPage uses these mechanisms to pressure landlords to comply with their price recommendations.
Is this Price-Fixing?
Assuming the allegations raised by the DOJ are true, there’s a good chance that RealPage is engaging in price-fixing.
RealPage’s real problem is how their tool was marketed. For example, RealPage’s Vice President of Revenue Management Advisory Services has allegedly stated, “there is greater good in everybody succeeding versus essentially trying to compete against one another,” and encouraging landlords to “move in unison versus against each other”
RealPage users appear to have gotten the message. One landlord allegedly made the connection organically: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term[s]. That’s classic price fixing . . . .”
Legal and Industry Implications
The complaint against RealPage is a significant step in addressing potential anti-competitive practices in the real estate software market. The outcome could reshape the landscape of revenue management in the multifamily property sector, ensuring that competitive practices are upheld, and tenants are protected from unfair pricing strategies.
This case could impact revenue management software more broadly, by pacing boundaries on how data is shared among competitors in various industries.
Conclusion
We’ll be monitoring the legal arguments and evidence presented as this case progresses. Rent prices are skyrocketing across the country. If the DOJ’s allegations are true, a connection between RealPage users and unusually high rents should be clear.
Stay tuned for further updates on this developing story.
