NC joins lawsuit accusing RealPage of helping landlords illegally collude to set rents
The federal government, joined by North Carolina and seven other states, filed an antitrust lawsuit Friday against RealPage, accusing the real estate software company of helping landlords across the country “sidestep” market competition that should bring rental prices down, and instead charge renters more.
In a 115-page complaint filed in the Middle District of North Carolina, the federal government said RealPage had “built a business out of frustrating the natural forces of competition” with software it sells to landlords to collect “nonpublic information” about renters gathered by competing landlords, and make “pricing recommendations.”
The complaint states that while renters rely on “robust and fierce competition between landlords,” the software landlords use from RealPage “distorts that competition.”
“RealPage develops, markets, and sells this software to enable landlords to sidestep vigorous competition to win renters’ business,” the complaint states. “Landlords, who would otherwise be competing with each other, submit on a daily basis their competitively sensitive information to RealPage.
“This nonpublic, material, and granular rental data includes, among other information, a landlord’s rental prices from executed leases, lease terms, and future occupancy,” the government states in the complaint. “RealPage collects a broad swath of such data from competing landlords, combines it, and feeds it to an algorithm.”
After collecting that data and inputting it into its algorithm, RealPage provides landlords with “daily, near real-time” pricing recommendations, and monitors compliance by those landlords, the complaint states.
In some cases, landlords “effectively agree to outsource their pricing function to RealPage with auto acceptance or other settings such that RealPage as a middleman, and not the free market, determines the price that a renter will pay.”
That means, the government alleges, that competing landlords that share their information with RealPage “eliminate the guessing game” about what prices their competitors are charging, and “ultimately take instructions from RealPage on how to make business decisions to ‘optimize’ — or in reality, maximize — rents.”
Yearlong investigation into RealPage by NC AG’s office
The lawsuit, which accuses the Texas-based company of violating sections of federal antitrust law, seeks to rid rental markets of RealPage’s “unlawful information-sharing scheme,” and end what the government said was “its illegal monopoly in commercial revenue management software.”
North Carolina Attorney General Josh Stein joined the lawsuit, as have a bipartisan group of attorneys general and lawyers for the seven other states.
During a press conference Friday afternoon, Stein said that while the exact usage of RealPage’s software by landlords in North Carolina isn’t clear right now, three of the top 10 markets the company operates in are Charlotte, Raleigh, and Durham and Chapel Hill.
Stein, a Democrat who is running for governor, said the lawsuit was filed in North Carolina because the state “was harder hit than almost any other state in the country,” and because attorneys joining the legal action knew he “would aggressively pursue it.”
“A healthy market encourages competition, fair prices, and innovation to the benefit of customers,” Stein said. “When businesses play by the rules, they make our lives better. But no company has the right to use illegal agreements and information-sharing to damage competition, artificially inflate prices, and reap unlawful rewards.”
Stein’s office publicly announced its investigation into RealPage, which began a year ago, in March.
Officials elsewhere around the country have already taken the company to court. Arizona sued RealPage and nine landlords in February, while the District of Columbia filed its own lawsuit last November against RealPage and 13 landlords.
In July, Politico reported the U.S. Department of Justice was planning to file a civil suit against the company challenging “collusive conduct in the rental housing market.”
In a statement Friday, Jennifer Bowcock, a spokeswoman for RealPage, said the company is “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.”
Bowcock also said that RealPage’s software “is purposely built to be legally compliant, and we have a long history of working constructively with the DOJ to show that.”
In response to questions from The News & Observer earlier this month about the ongoing scrutiny of its software, Bowcock said the software “recommends rates in all directions — oftentimes recommending rent reductions.” She said participating landlords “retain 100% control over the rents they offer, and they accept, reject, or modify the software’s recommendations at widely varying rates.”
Responding to the latest lawsuit Friday, Bowcock said RealPage intends to “vigorously defend ourselves against these accusations.”
Scrutiny of ‘artificially high’ prices on the campaign trail
Stein said that the lawsuit is seeking to stop RealPage from continuing to use its software in the rental market, and as a result, lead to lower, more competitive rents.
Scott Hazelgove, an attorney at Wyrick Robbins Yates & Ponton who focuses on antitrust issues, previously told The N&O that a successful legal challenge of RealPage’s software and its usage by landlords will “have to prove the existence of an agreement here, and if there is no express agreement, then they’re going to have to provide evidence from which a court could infer an agreement.”
“Courts have been dealing with these concepts for over a century,” Hazelgove said. “Just the nature of industry and economic activity has changed so much. And a lot of industries are relying on algorithms now. But I think courts are able to apply traditional antitrust principles to newer business practices like algorithmic pricing.”
The lawsuit comes as alleged price-fixing practices by corporations have come under scrutiny on the presidential campaign trail.
While unveiling her economic agenda in Raleigh last week, Vice President Kamala Harris emphasized the role that she said corporations have played in causing higher living costs for average people, including in the food and grocery industries, and in the home buying and rental markets.
While talking about her plan to increase the housing supply and reduce rental and housing costs across the country, Harris criticized corporate investors and landlords who purchase properties and “collude with each other to set artificially high rental prices.”
“It’s anti-competitive and it drives up costs,” Harris said, adding that she would fight for a law “that cracks down on these practices.”
In the Spotlight designates ongoing topics of high interest that are driven by The News & Observer’s focus on accountability reporting.
This story was originally published August 23, 2024 at 12:57 PM.
