Category: US Department of Justice

Source: United States Department of Justice Criminal Division

Remarks as Prepared for Delivery

Renters deserve the benefits of vigorous competition. In prosperous times, that competition should limit rent hikes; in harder times, competition should bring down rent, making housing more affordable.

RealPage has built a business out of frustrating the natural forces of vigorous competition.

In the words of RealPage, “a rising tide raises all ships.” This is more than just marketing. It’s literally the cost of housing for millions of Americans.

For RealPage, that rising tide of rents means more profits. For landlords, that rising tide means more revenues from higher rents. 

But renters pay the price. For renters, that rising tide means less money for food, healthcare, childcare and education. For renters, that rising tide means less money for families to make ends meet.

Today, we filed an antitrust suit against RealPage to fight the rising tide of high rent, to restore competition and to make housing more affordable for millions of people across the country.

This is best understood in the words of RealPage’s own executives. Here are some examples:

RealPage says its software enables landlords to — and this is a direct quote — “driv[e] every possible opportunity to increase price even in the most downward trending or unexpected conditions.” But independent decision making by landlords — not RealPage — should determine rental prices.

RealPage encourages landlords to “[e]liminate concessions.” But competition — not RealPage — should determine whether a renter gets a free month of rent when signing a lease.

RealPage tells landlords that it would prefer “everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.” But that’s not how free markets work. Competition among landlords — not RealPage — should determine prices for renters in our free market system.

When a landlord asked, “who are your competitors?” A RealPage executive responded: “Our revenue management solution does not have any true competitors.” But honest businesses should not have to break the law just to compete with RealPage and its monopoly.

These quotes are just the tip of the iceberg. There are many, many more examples in our extensive complaint, which spans over 100 pages.

The time has come to stop this illegal conduct.

I want to thank the Antitrust Division’s attorneys, paralegals, economists, data scientists and professional staff for making this lawsuit possible. Over nearly two years, they have worked nonstop, going document by document and line by line of code to understand RealPage and its anticompetitive scheme.

Together with our State partners, this team has proven that antitrust law enforcement can and will keep pace with changes in the technology of lawbreaking.

On the one hand, we used our traditional economic and investigative tools such as reviewing internal documents and taking deposition testimony.

On the other hand, we also used data science experts to interrogate the code so that we can understand how algorithms use sensitive information from landlords to recommend and set prices.

Our lawsuit demonstrates that modern-day wrongdoers cannot hide behind software algorithms and artificial intelligence to violate the law.

Throughout this investigation, we learned that the modern machinery of algorithms and AI can be even more effective than the smoke-filled rooms of the past.

You don’t need a PhD to know that algorithms can make coordination among competitors easier. Algorithms process far more information more rapidly than humans. The technical capabilities of software can enhance competitors’ ability to extract gains; tip the market in favor of monopolies; and undermine the competitive process.

While these modern technologies might have been unimaginable in 1890 when Congress passed the Sherman Act, Congress knew then what we know today. A restraint of trade is still a restraint of trade and monopolization is still monopolization.

The antitrust laws had something to say about it then and the antitrust laws have something to say about it now.  

And let me be clear: when companies use artificial intelligence to set artificially high prices, the antitrust laws have something to say about that too.

We are joined in sending that message by the Attorneys General and the terrific staffs from North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington.

We are honored to stand together to protect competition on behalf of American renters.  

Thank you. 

Source: United States Department of Justice Criminal Division

Remarks as Prepared for Delivered

Thank you, Mr. Attorney General.

Since the beginning of this administration, our approach to corporate misconduct across the Justice Department has been simple, straightforward, and relentless.

We identify the most serious wrongdoers, whether individuals or companies, and we focus our full energy on holding them accountable.

Today’s complaint against RealPage illustrates this strategy in action.

In this country, we’ve had laws for over a century that promote healthy competition.

Competition is the bedrock of our market economy — like how a strong foundation supports a house.

When that competition — that foundation — is undermined, the house stands on shaky ground, compromising its stability and the security of those who live there.

Today, we’re seeing this phenomenon play out in our nation’s rental housing market.

As alleged in our complaint, RealPage is using technology to undermine competition in the rental market and to harm consumers in the process.

By feeding sensitive data into a sophisticated algorithm, RealPage has found a modern way to violate a century-old law through systematic coordination of rental housing prices.

Healthy competition in the rental housing market requires two key ingredients.

The market must be dictated by open and honest competition among landlords.

And, renters must be able to negotiate prices with landlords — without the specter of collusion — to arrive at a fair deal for all involved.

But RealPage has shut away those ingredients, changed the locks, and thrown away the keys

And they’ve done that by selling software to landlords – software that operates off an algorithm to drive pricing – among other things.  

As alleged:

• RealPage’s systems rely on confidential and sensitive pricing data from landlords.
• They run this data through a machine learning model to set prices, then recommend them to landlords.
• And through this process, they enable landlords to avoid negotiating with tenants, without concern they’ll be undercut by competitors.

That’s collusion — and that’s against the law.

Let’s be clear, algorithms don’t operate in a law-free zone. 

After all, humans create them.

Our laws will always apply to the people behind the machines and the companies behind the algorithms.

This idea is core to how the Department is addressing technology-enabled crimes — particularly those that employ artificial intelligence and machine learning.

Because while the law governing AI is sure to develop over time, our existing laws and enduring legal tools — including the antitrust laws — already offer a firm foundation.

Make no mistake:

• Training a machine to break the law is still breaking the law.
• Price coordination using AI is still price coordination.
• And monopolization advanced by an algorithm is still monopolization.

I want to thank the women and men of the Antitrust Division — and Assistant Attorney General Jonathan Kanter for his leadership and their hard work on this matter; I want to thank them for promoting healthy competition and fairness across this critical market; and for protecting consumers, renters and landlords alike.

No company or individual is above the law — and today’s action, once again, makes that crystal clear.

With that, I’d like to invite up Acting Associate Attorney General Mizer.

Source: United States Department of Justice Criminal Division

Remarks as Delivered

Good morning.

Over a century ago, Congress passed the Sherman Antitrust Act to protect competition in the marketplace. As the Supreme Court has explained, the “central evil” addressed by Section 1 of that Act is “the elimination of competition that would otherwise exist,” including competition on prices.

When the Sherman Act was passed, an anticompetitive scheme might have looked like robber barons shaking hands at a secret meeting.

Today, it looks like landlords using mathematical algorithms to align their rents.

But antitrust law does not become obsolete simply because competitors find new ways to unlawfully act in concert.

And Americans should not have to pay more in rent simply because a company has found a new way to scheme with landlords to break the law.

So today, after a nearly-two-year investigation, the Justice Department, joined by eight states, has sued RealPage, a commercial real estate software company, for violating the Sherman Antitrust Act.

RealPage sells landlords what it calls “revenue management” software. We allege that this software is developed, marketed, and sold to enable landlords to sidestep vigorous competition in the rental market. Competing landlords agree to submit to RealPage, on a daily basis, their most sensitive, non-public information, including rental rates, lease terms, and projected vacancies.  

RealPage then combines this data from competing landlords and feeds it into an algorithm that provides real-time pricing recommendations back to the competing landlords. 

But as we allege, these are more than just recommendations. RealPage actively polices landlords’ compliance with those recommendations. It also monitors landlords’ other policies by, for example, trying to stop concessions that landlords use to attract or retain renters. 

A large number of landlords effectively agree to outsource their pricing decisions to RealPage by using an “auto accept” setting, which effectively permits RealPage to determine the price a renter will pay.

Landlords understand what their arrangement with RealPage gets them. As one said, “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and terms. That’s classic price fixing.”

And RealPage understands what it’s doing, too. In advertising its service to landlords, RealPage frequently says that a “rising tide raises all ships.” As a RealPage vice president explained, this phrase means that “there is greater good in everybody succeeding versus essentially trying to compete against one another.”

But “essentially trying to compete against one another” is what our free-market economy is all about. And ensuring such competition what our antitrust laws are all about.

Americans spend more money on housing than any other expense. Tens of millions of Americans are renters, and almost half of those households spend close to a third of their hard-earned income on rent.

Under the antitrust laws, landlords — like any competitors — may not share with each other their confidential, sensitive data in a way that permits them to align how they price their products —in this case apartments — and thus cause renters to pay more than they would in a competitive market. Using software as the sharing mechanism — or calling it “Artificial Intelligence Revenue Management” as RealPage does — does not immunize the scheme from Sherman Act liability.

The Justice Department takes seriously its responsibility to protect Americans from illegal conduct that undermines competition and drives up prices.

We will continue to aggressively enforce the antitrust laws and protect the American people from those who would violate them.

I applaud the attorneys and staff of the Department’s Antitrust Division for their outstanding work on this case on behalf of the American people.

Thank you all.

Source: United States Department of Justice Criminal Division

Remarks as Prepared for Delivery

Thank you, Deputy Attorney General Monaco.

I would like to reiterate the Attorney General’s and the Deputy Attorney General’s thanks to the leadership and staff of the Antitrust Division. They have exhibited the utmost professionalism and dedication throughout the long-running investigation that led to today’s complaint.

This civil action against RealPage exemplifies the Department’s commitment to combatting anticompetitive practices that increase the prices Americans pay on a daily basis. The complaint alleges that RealPage uses its software to collect and share landlords’ competitively sensitive information about rental prices, projected vacancies, and lease terms. The software then feeds landlords daily pricing recommendations, taking the guesswork out of understanding what competing landlords are doing. As a result, landlords can align rental prices, and tenants are limited in their ability to successfully negotiate counteroffers or seek discounts.

This type of conduct is egregious. But it is unfortunately not limited to the rental housing industry. We’ve seen unfair and illegal pricing practices in many different industries, and staff in the Antitrust Division — and the Department more broadly — are working tirelessly to combat these practices wherever they arise.

For example, the Antitrust Division is currently litigating a challenge against a company that we allege uses similar strategies to facilitate information sharing among meat processors, leading to higher prices for kitchen staples like chicken, turkey, and pork. And the Division recently shut down another information exchange that helped processors to suppress wages and benefits for employees working in poultry processing plants.

Separately, in the criminal antitrust context, we’ve worked to root out price-fixing conduct among pharmaceutical companies. Last year, we reached resolutions with two drug companies that admitted to fixing the prices of essential medicines used to lower cholesterol and treat eye and skin infections. Those resolutions required the companies to donate $50 million in drugs, pay $255 million in criminal penalties, and divest the drug product lines that were a core part of the conspiracy.                                

We’ve also seen unfair pricing practices in the transportation industry. Our Civil Division and U.S. Attorneys’ Offices have prosecuted individuals for hiking the prices of used cars by rolling back odometer readings and falsifying vehicle titles. And the Civil Division has also sued companies for forcing car buyers to pay for expensive insurance that they do not want or need.

The Department remains committed to fighting these and other unlawful pricing practices regardless of how and where they might arise. Today’s suit against RealPage reflects our continued commitment to promoting competition and advancing economic opportunity and equity.

I’ll now turn it over to Assistant Attorney General Jonathan Kanter.

Source: United States Department of Justice

The Justice Department, together with the Attorneys General of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington, filed a civil antitrust lawsuit today 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. RealPage’s alleged conduct deprives renters of the benefits of competition on apartment leasing terms and harms millions of Americans. The lawsuit was filed today in the U.S. District Court for the Middle District of North Carolina and alleges that RealPage violated Sections 1 and 2 of the Sherman Act.

The complaint alleges that RealPage contracts with competing landlords who agree to share with RealPage 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.

“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 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.”

“Today’s complaint against RealPage illustrates our corporate enforcement strategy in action. We identify the most serious wrongdoers, whether individuals or companies, and focus our full energy on holding them accountable,” said Deputy Attorney General Lisa Monaco. “By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has found a modern way to violate a century-old law through systematic coordination of rental housing prices — undermining competition and fairness for consumers in the process. Training a machine to break the law is still breaking the law. Today’s action makes clear that we will use all our legal tools to ensure accountability for technology-fueled anticompetitive conduct.” 

“RealPage’s egregious, anticompetitive conduct allows landlords to undermine fair pricing and limit housing options while stifling necessary competition,” said Acting Associate Attorney General Benjamin C. Mizer. “The Department remains committed to rooting out illegal schemes and practices aimed at empowering corporate interests at the expense of consumers.” 

“As Americans struggle to afford housing, RealPage is making it easier for landlords to coordinate to increase rents,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “Today, we filed an antitrust suit against RealPage to make housing more affordable for millions of people across the country. Competition – not RealPage – should determine what Americans pay to rent their homes.”

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. For example:

• 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…”

The complaint alleges that RealPage’s agreements and conduct harm the competitive process in local 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 separately 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.

RealPage Inc., is a property management software company headquartered in Richardson, Texas.