Possibly good news for renters.
The Department of Justice’s Antitrust Division has opened an investigation into whether rent-setting software made by Richardson-based tech company RealPage is facilitating collusion among landlords, ProPublica reported.
The inquiry is being launched as questions have arisen about a 2017 merger between RealPage and its largest pricing competitor. A source with knowledge of the matter told ProPublica that some DOJ staff raised concerns about the merger but were overridden by political appointees of former President Donald Trump.
Congressional leaders have pushed for an investigation into RealPage in three letters to the DOJ and the Federal Trade Commission, which were sent after a ProPublica report on the software’s use in mid-October.
The letters raised concerns that RealPage’s pricing software could be pushing rents above competitive levels and allowing big landlords to coordinate their pricing in violation of federal antitrust laws.
“We are concerned that the use of this rate setting software essentially amounts to a cartel to artificially inflate rental rates in multifamily residential buildings,” three senators said in a letter in early November. They included Sen. Amy Klobuchar, the Minnesota Democrat who chairs the Senate Subcommittee on Competition Policy, Antitrust and Consumer Rights.
The Capital Forum first reported the existence of the investigation.
RealPage’s software works by collecting information from property managers who are the company’s clients, including what rents they are able to charge tenants. That information is fed into an algorithm that then recommends prices daily for each available apartment.
Though RealPage says the information is aggregated and anonymized, some experts have said using private data from competitors to set rents could run afoul of antitrust laws, allowing property managers to illegally coordinate their pricing.
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The DOJ’s investigation represents the second time the federal law enforcement agency has looked into RealPage’s rent-setting software. In 2017, the DOJ flagged a proposed merger in which RealPage sought to buy its biggest competitor, a company called Rainmaker Group, which made rent-setting software known as LRO, or Lease Rent Options.
RealPage’s then-CEO Steve Winn said the $300 million purchase would allow RealPage to double the number of apartments it was pricing from 1.5 million to 3 million units. RealPage was sold in 2020 to private equity firm Thoma Bravo in a $10 billion deal.
After the acquisition was announced in early 2017, the DOJ requested additional information from the companies involved. Federal regulators scrutinize mergers above a certain size — right now, it is transactions valued at $101 million — and typically allow them to proceed after only a preliminary review.
But the government can request more information from companies and even seek to block the merger in court if it believes it could substantially harm competition.
A paralegal specialist who worked on the original DOJ probe into RealPage said it was narrowly focused on the impact on competitors who made software with a similar purpose. The paralegal said she was unaware of any complaints by those companies about the proposed merger.
See here for some background, and that linked Pro Publica story for more on this investigation. My earlier post is about a lawsuit filed by a group of renters over RealPage’s pricing algorithms. It’s not totally clear to me what the Justice Department could do at this time, but let’s see what they find now that they’re looking. I suspect any real action would have to be legislative, and for obvious reasons that won’t happen anytime soon. At least the issue is getting some publicity.