On Friday, the U.S. Department of Justice (DOJ) and eight states filed a landmark civil antitrust lawsuit against the software company RealPage, accusing it of engaging in unlawful practices that undermine competition among landlords and inflate rental prices for millions of renters.
The lawsuit, lodged in the U.S. District Court in North Carolina, alleges that RealPage has used its algorithmic tools to manipulate market forces in a manner detrimental to renters and fair market competition.
The DOJ’s complaint describes RealPage as an “algorithmic intermediary” that collects and exploits competitively sensitive information from landlords. The lawsuit contends that RealPage’s practices have allowed landlords to coordinate their pricing strategies, effectively stifling competition and leading to higher rental costs for tenants.
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“RealPage allows landlords to manipulate, distort, and subvert market forces,” the complaint asserts. “In so doing, it enriches itself and compliant landlords at the expense of renters who pay inflated prices and honest businesses that would otherwise compete.”
Attorney General Merrick Garland, during a press conference on Friday, underscored the severity of the allegations: “Everybody knows the rent is too damn high, and we allege this is one of the reasons why.”
He stated that the lawsuit represents a significant step in addressing new methods of anti-competitive behavior facilitated by technology.
This lawsuit marks the first time the U.S. government has accused a company of systematically using algorithms to subvert free-market competition. Garland pointed out that antitrust laws remain relevant even as companies devise new methods to collude unlawfully.
“Antitrust law does not become obsolete simply because competitors find new ways to unlawfully act in concert,” Garland stated. “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.”
The DOJ is supported in this legal action by the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington. Their joint effort highlights the broad concern about the impact of RealPage’s alleged practices on housing affordability across various states.
RealPage’s Response
RealPage, which is owned by the private equity firm Thoma Bravo, has vowed to defend itself against the accusations. The company dismissed the lawsuit as a “distraction” from broader economic issues driving inflation and called the legal action an attempt to scapegoat its technology.
“We are disappointed that, after multiple years of education and cooperation on the antitrust matters concerning RealPage, the DOJ has chosen this moment to pursue a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years,” RealPage said in a statement on X (formerly Twitter).
The company maintained that its revenue management software is designed to comply with legal standards and that it has a history of cooperating with the DOJ.
The Lawsuit and Biden Administration’s Push to Lower Housing Costs
The timing of the lawsuit is notable, coming in the midst of a U.S. presidential election cycle where housing affordability has become a critical issue. Democratic presidential nominee Kamala Harris has recently unveiled an economic plan aimed at reducing rental costs, which includes measures to address collusion among landlords facilitated by price-setting tools.
The White House, while declining to comment directly on the DOJ’s lawsuit, released a statement from national economic advisor Lael Brainard. Brainard reaffirmed the administration’s commitment to addressing high rental prices, stating that “President Joe Biden and Vice President Harris know that too many Americans feel squeezed by high rents.”
She emphasized the administration’s support for vigorous enforcement of antitrust laws to prevent illegal collusion and ensure fair market practices.
President Joe Biden has emphasized the urgent need to address the rising housing costs in the United States, calling for significant investments to tackle the severe shortage of affordable homes. This shortage, which has been growing for more than a decade, was said to have been exacerbated by the previous administration’s inaction.
Earlier this year, Biden urged Congressional Republicans to break the legislative gridlock and pass measures designed to lower housing costs. His proposals include a $10,000 tax credit for first-time homebuyers and those selling their starter homes, the construction and renovation of over 2 million homes, and efforts to reduce rental costs.
In addition to these proposals, Biden announced new steps to make homebuying and refinancing more accessible by lowering closing costs and cracking down on corporate practices that exploit renters.
Earlier this month, the White House introduced a series of new initiatives aimed at boosting the construction of affordable housing units and easing the affordability crisis affecting both renters and homebuyers. These actions include $100 Million in Community Grants. This funding is intended to help communities identify and remove barriers to affordable housing production and preservation.
With housing affordability being a central issue in current political discourse, the DOJ’s lawsuit against RealPage represents a significant action supporting Biden’s administration’s push for affordable housing.