Price collusion is in the news lately, but it’s not the backroom deals between managers that is the focus for enforcement officials and legislators.
There has been a spate of legislation and lawsuits targeting the use of software that gives visibility to competitors’ prices. This allows firms to adjust their prices, either undercutting the competition or setting a de facto floor.
Pricing algorithms not only help you when you’re searching for the best deals on airfare, hotels, and anything else on your shopping list, they also can be used to set those prices. It’s the latter use of pricing algorithms that is facing recent scrutiny. San Francisco just took the first steps to pass legislation that will ban the use of software that it claims was used by landlords to collude to set rental rates. According to ars Technica, “The ban targets software companies RealPage and Yardi[,]”[1] programs that collect landlord pricing data and make pricing and occupancy recommendations. San Francisco Board of Supervisors President Aaron Peskin asserts that RealPage’s executives told investors that use of its software has resulted in “double-digit increases in rents, increased ‘turnover’ of units, and increased vacancy rates.”[2]
This isn’t the only headwinds RealPage and Yardi are facing. RealPage is also a party in a multi-district litigation pending in Tennessee where renters alleged companies that own and run rental housing artificially inflated rental prices above market rates and shared non-public, commercially sensitive information using RealPage software.[3] Two companies Apartment Income REIT Corp., and Pinnacle Property Management Services LLC recently settled with the plaintiffs.[4]
The DOJ filed additional litigation on August 23, 2024, along with the Attorneys General of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington, against RealPage in the Middle District of North Carolina.[5] According to the DOJ press release, “[t]he 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.” RealPage has publicly asserted that these claims are “devoid of merit” and will mount a “vigorous” defense.[6]
Likewise, the Federal Trade Commission and DOJ filed a joint brief in a class-action case against Yardi and property owners in the US District Court for the Western District of Washington asserting that the use of software that enables landlords to collude on setting rental rates.[7]
But the DOJ hasn’t stopped at landlords’ use of price-setting software. The DOJ has also sued Agri Stats Inc., in the District of Minnesota, which it asserts set up anticompetitive information exchanges among broiler chicken, pork and turkey processors.[8] The DOJ complaint alleges that Agri Stats collected, integrated, and distributed pricing, cost, and output information among competitors, often compiled down to particular processing plants.[9] This information made its way into weekly and monthly reports for the companies that utilized Agri Stats services. “The complaint further alleges that Agri Stats understood that meat processors have used these reports for anticompetitive purposes and, in some instances, even encouraged meat processors to raise prices and reduce supply.”[10]
Regardless of the industry, these lawsuits by both private and governmental agencies counsel caution for businesses that may utilize third-party vendors that compile and share data among competitors and utilize common pricing algorithms or pricing recommendations. If you have questions or concerns about your business’s use of these or similar pricing or data compilation and sharing services, talk to an attorney well-versed in competition law.
[1] https://arstechnica.com/tech-policy/2024/08/san-francisco-to-ban-software-that-enables-price-collusion-by-landlords/
[2] Id.
[3] In re: RealPage Rental Software Antitrust Litigation, U.S. District Court, Middle District of Tennessee, Case No. 23-md-03071.
[4] https://www.reuters.com/legal/litigation/first-settlements-reached-realpage-rental-price-fixing-lawsuits-2024-02-05/
[5] https://www.justice.gov/opa/pr/justice-department-sues-realpage-algorithmic-pricing-scheme-harms-millions-american-renters
[6] https://www.pymnts.com/legal/2024/property-management-software-company-realpage-vows-to-fight-doj-lawsuit/?utm_source=Sailthru&utm_medium=email&utm_campaign=Main%20NL%2008/26&utm_term=daily_nl
[7] Duffy v. Yardi Systems Inc et al., Case No. 2:2023-cv-01391.
[8] https://www.justice.gov/opa/pr/justice-department-sues-agri-stats-operating-extensive-information-exchanges-among-meat
[9] Id.
[10] Id.
