In a highly anticipated move, the U.S. Department of Justice ("DOJ") along with eight states filed a complaint against RealPage, Inc. for antitrust claims arising from its pricing software. The DOJ claims that RealPage has violated Sections 1 and 2 of the Sherman Antitrust Act through RealPage's alleged unlawful information-sharing scheme and illegal monopoly in commercial revenue management software.
RealPage currently offers three revenue management systems to its clients: YieldStar, AI Revenue Management (AIRM) and Lease Rent Options (LRO). According to the complaint, RealPage plans to sunset both YieldStar and LRO by the end of 2024. The DOJ alleges RealPage has access to confidential information from its software customers (e.g. landlords) that it uses to generate prices, including data such as rental applications, executed new leases, renewal offers and acceptances, and forward-looking occupancy.
The DOJ alleges: "The combined troves of nonpublic, competitively sensitive data are much more granular, sensitive, timely, and comprehensive than alternatives—and far more detailed than any data publicly available to potential renters." (Complaint, page 17). From this, the DOJ argues that RealPage not only serves as an intermediary to allow landlords to fix the price of rental units (although no landlords or other third parties are named as defendants) but that it also stunts competition with legitimate software applications that lack the same access to sensitive information.
Perhaps the biggest legal question raised by the DOJ's complaint will be what degree of adherence the DOJ must show to prove the existence of an agreement and thus its claims. Notably, the DOJ alleges that nearly 60% of final floor plan prices are within 2.5% of RealPage's recommendation, and more than 85% are within 5%. This, however, means that more than 40% of the time, the landlords and other property managers who use RealPage's software are not adopting its specific recommendation. And in at least 15% of pricing decisions, the price adopted is not within 5% of the recommendation. This is far from the 100% compliance that some defendants have argued is necessary to prove the existence of an agreement and thus an antitrust conspiracy to fix the price. This issue is far from settled, and the DOJ has been filing statements of interest in other algorithmic price-fixing cases to establish that 100% adherence is not required.
We will continue to monitor this case and update our clients as the case proceeds through RealPage's opportunity to respond and early discovery.
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