Senate Democrats seek probe of tech firm accused of colluding with landlords to hike apartment rents

Senate Democrats seek probe of tech firm accused of colluding with landlords to hike apartment rents
Sen. Amy Klobuchar of Minnesota speaking with attendees at the Presidential Gun Sense Forum, hosted by Everytown for Gun Safety and Moms Demand Action at the Iowa Events Center in Des Moines, Iowa on Aug. 10, 2019, Gage Skidmore
Economy
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The senator tasked with overseeing federal antitrust enforcement is urging the U.S. Department of Justice to investigate whether a Texas-based company’s price-setting software is undermining competition and pushing up rents.

Amy Klobuchar, the Minnesota Democrat who chairs the Senate Subcommittee on Competition Policy, Antitrust and Consumer Rights, sent a letter to the DOJ’s Antitrust Division this month. It was also signed by two other Democrats, Sen. Richard Durbin of Illinois and Sen. Cory Booker of New Jersey.

“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,” the letter said. It encouraged the DOJ to “take appropriate action to protect renters and competition in the residential rental markets.”

In mid-October, a ProPublica investigation documented how real estate tech company RealPage’s price-setting software uses nearby competitors’ nonpublic rent data to feed an algorithm that suggests what landlords should charge for available apartments each day. Legal experts said the algorithm may be enabling violations of antitrust laws.

ProPublica detailed how RealPage’s User Group, a forum that includes landlords who adopt the company’s software, had grown to more than 1,000 members, who meet in private at an annual conference and take part in quarterly phone calls. The senators raised specific questions about the group, saying, “We are concerned about potential anticompetitive coordination taking place through the RealPage User Group.”

RealPage did not immediately respond to a request for comment.

RealPage has said that the company “uses aggregated market data from a variety of sources in a legally compliant manner” and that its software prioritizes a property’s own internal supply and demand dynamics over external factors such as competitors’ rents. The company has said its software helps reduce the risk of collusion that would occur if landlords relied on phone surveys of competitors to manually price their units.

The DOJ declined to comment on the letter.

The department five years ago reviewed RealPage’s plan to acquire its biggest competitor in pricing software, but federal prosecutors declined to seek to block the merger, which doubled the number of apartments RealPage was pricing.

The senators noted that transaction, saying RealPage has made more than 10 acquisitions since 2016. They said in data-intensive industries, “the ability to acquire more data can result in the algorithms suggesting higher prices and can also increase the barriers to entry” for other competitors. The lawmakers encouraged the department “to consider looking back at RealPage’s past behavior to determine whether any of it was anticompetitive.”

The letter follows two others sent by lawmakers urging the DOJ or Federal Trade Commission to investigate RealPage. Since ProPublica’s investigation was published, three lawsuits have been filed on behalf of renters alleging that the software is artificially inflating rents and facilitating collusion. RealPage has denied allegations in a lawsuit filed in San Diego, and it has not responded to calls for comment about the other two legal actions, filed in federal district court in Seattle.

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