Attorney General Ellison sues RealPage for algorithmic pricing scheme that harms renters

Joins DOJ and seven states alleging RealPage’s pricing algorithm violates antitrust laws

Follows 2023 lawsuit alleging similar behavior by Agri Stats in food markets

August 23, 2024 (SAINT PAUL) — Minnesota Attorney General Keith Ellison announced today that he has joined the U.S. Department of Justice and a bipartisan coalition of attorneys general from California, Colorado, Connecticut, North Carolina, Oregon, Tennessee, and Washington in filing a civil antitrust lawsuit  against RealPage Inc. for its unlawful scheme to decrease competition among landlords in apartment pricing and to monopolize the market for commercial revenue-management software that landlords use to price apartments. Attorney General Ellison, DOJ, and the bipartisan coalition allege that RealPage — a Texas-based property-management software company that is owned by private-equity firm Thoma Bravo — deprives renters of a fair market and the benefits of competition on apartment-leasing terms and harms millions of Americans, including Minnesotans. RealPage is used by landlords in Minnesota, resulting in higher rents. The lawsuit, filed today in the U.S. District Court for the Middle District of North Carolina, alleges that RealPage’s conduct violates Sections 1 and 2 of the Sherman Act.

In the complaint, Attorney General Ellison, the DOJ, and the bipartisan coalition allege that RealPage contracts with competing landlords who agree to share nonpublic, competitively sensitive information about their apartment rental rates and other lease terms to train and run RealPage’s algorithmic pricing software. This software then generates recommendations, including on apartment rental pricing and other terms, for participating landlords based on their and their rivals’ competitively sensitive information. The complaint further alleges that in a free market, these landlords would otherwise be competing independently to attract renters based on pricing, discounts, concessions, lease terms, and other dimensions of apartment leasing. RealPage also uses this scheme and its substantial data trove to maintain a monopoly in the market for commercial revenue-management software. The complaint seeks to end RealPage’s illegal conduct and restore competition for the benefit of renters in states across the country.

“Minnesotans and Americans everywhere increasingly understand that a big reason for inflation is corporate greed,” Attorney General Ellison said. “It’s hard enough to afford your life — and when illegal behavior makes it hard to afford the basics like housing and food while corporate profits skyrocket, I will step in to stop it. I’m proud to join this bipartisan coalition and the DOJ in once again holding a company accountable that is violating antitrust law and illegally making it harder for people to afford their lives.”

In November 2023, Attorney General Ellison joined DOJ and another bipartisan coalition of states in filing a similar lawsuit against Agri Stats for organizing and managing anticompetitive information exchanges among broiler chicken, pork and turkey processors, leading to higher food prices for consumers in Minnesota and across America.

“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” said United States Attorney General Merrick B. Garland. “We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents. Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability, and the Justice Department will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them.”

The complaint cites internal documents and sworn testimony from RealPage and commercial landlords that make plain RealPage’s and landlords’ objective to maximize rental pricing and profitability at the expense of renters:

• RealPage acknowledged that its software is aimed at maximizing prices for landlords, referring to its products as “driving every possible opportunity to increase price,” “avoid[ing] the race to the bottom in down markets,” and “a rising tide raises all ships.”
•  A RealPage executive observed that its products help landlords avoid competing on the merits, noting that “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”
• A RealPage executive explained to a landlord that using competitor data can help identify situations where the landlord “may have a $50 increase instead of a $10 increase for the day.”
• Another landlord commented about RealPage’s product, “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing…”

In the complaint, Attorney General Ellison, the DOJ, and the bipartisan coalition allege that RealPage’s agreements and conduct harm the competitive process in rental markets for multi-family dwellings across the United States. Armed with competing landlords’ data, RealPage also encourages loyalty to the algorithm’s recommendations through, among other measures, “auto accept” functionality and pricing advisors who monitor landlords’ compliance. As a result, RealPage’s software tends to maximize price increases, minimize price decreases, and maximize landlords’ pricing power. RealPage also trained landlords to limit concessions (e.g., free month(s) of rent) and other discounts to renters. The complaint also cites internal documents from RealPage and landlords touting the fact that landlords have responded by reducing renter concessions.

The complaint also alleges that RealPage has unlawfully maintained its monopoly over commercial revenue management software for multi-family dwellings in the United States, in which RealPage commands approximately 80% market share. Landlords agree to share their competitively sensitive data with RealPage in return for pricing recommendations and decisions that are the result of combining and analyzing competitors’ sensitive data. This creates a self-reinforcing feedback loop that strengthens RealPage’s grip on the market and makes it harder for honest businesses to compete on the merits.

Attorney General Ellison encourages Minnesota consumers and businesses who wish to report concerns about antitrust issues to submit a report online via the Antitrust Report Form. Consumers may also call the Attorney General’s Office at (651) 296-3353 (Metro area), (800) 657-3787 (Greater Minnesota), or (800) 627-3529 (Minnesota Relay).