A few big names in real estate are about to find themselves at the center of a legal battle that could rewrite the rules for the multifamily industry.
The Department of Justice will soon add six major multifamily landlords as defendants in its civil antitrust lawsuit against RealPage, the Promote reported, citing sources familiar with the matter.
The DOJ’s decision to include these landlords — whose haven’t been identified — points to a wider probe into collusion, extending beyond RealPage’s alleged role in facilitating rent-fixing.Â
The investigation into the Richardson-based property management software company and its clients comes amid growing concerns over the increasing concentration of power within the multifamily housing market, where a few large institutional landlords control a significant share of rental properties.Â
The lawsuit alleges the firm’s software enabled landlords to share pricing data in a way that led to coordinated rent-setting, resulting in artificially inflated rental prices. RealPage, headed by CEO Dana Jones, has denied the accusations, maintaining that its software merely provided recommendations rather than enforceable pricing structures.
If the DOJ succeeds in its case, it could set an important legal precedent for how antitrust laws apply to technological tools in real estate. A ruling against RealPage and its clients could lead to tighter regulations on how landlords can use nonpublic data and algorithms in pricing decisions, potentially making it harder for companies to rely on data-sharing practices that may hinder competition.Â
Meanwhile, Yardi Systems, the primary competitor to RealPage, is readying its own defense against a price-fixing lawsuit. In December, Judge Robert Lasnik of the U.S. District Court for the Western District of Washington ruled that collusion via algorithms can be viewed as price-fixing.Â
In antitrust cases involving pricing software, courts have primarily focused on whether plaintiffs can prove that users contribute competitively sensitive information that is then used by algorithms to recommend prices. When plaintiffs fail to prove this allegation, courts have granted motions to dismiss, as seen in cases involving casino hotels in Las Vegas and Atlantic City.Â
However, in the case against RealPage, the court allowed the lawsuit to proceed, as plaintiffs claimed the company’s software used confidential competitor data to generate pricing recommendations, raising concerns about coordinated pricing among apartment owners. Although the DOJ concluded its criminal probe into the firm in December, the civil lawsuit is still active.
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Similarly, in the case against Yardi, Judge Laznik ruled that the plaintiffs’ allegations were comparable to those in the RealPage case and allowed the lawsuit to move forward. Yardi’s software, marketed to help apartment owners increase rents, required users to share sensitive market data, which the court found could indicate collusion.Â
Unlike the RealPage case, where the conduct was not classified as illegal, Judge Laznik ruled that the alleged conduct in the Yardi case amounted to price-fixing, deeming it anticompetitive by nature.
— Andrew Terrell