RealPage must face a class-action lawsuit claiming it conspired with landlords to artificially inflate multifamily rents, after a federal judge rejected the company’s motion to dismiss the case Thursday.
U.S. District Judge Waverly Crenshaw in Nashville, Tenn. ruled that the renters who filed the suit showed enough cause for RealPage and its parent company, private equity firm Thoma Bravo, to face their antitrust claims.
Some of the country’s largest multifamily landlords, such as Greystar, AvalonBay Communities and Equity Residential (EQR), use Realpage’s revenue management software (RMS) to price rents at more than 4 million apartments in the United States, per court filings.
The renters’ claims rest on the fact that landlords who use RealPage’s RMS agree to share sensitive, private pricing information, which they know will be shared with competitors, in order to set rents. Importantly, RealPage clients must agree to use the firm’s pricing strategy, and RealPage monitors their compliance rate, which is generally higher than 90 percent. If companies choose to employ their own pricing strategists, they must be trained by RealPage experts.
This constitutes a basic horizontal price-fixing scheme, per the complaint, as would-be competitors are working together.
In one case, a client wrote of Lease Rent Options (LRO), a revenue management software acquired by RealPage and later merged with its primary system: “We are all technically competitors, [but] LRO helps us to work together . . . to make us all more successful in our pricing . . . LRO is designed to work with a community in pricing strategies, not work separately,” as cited in the complaint.
Another client confirmed that the pricing is basically hands-off once RealPage is in motion. “There is not much to do beyond checking the software to ensure that it is continuing to push prices higher,” wrote client Camden Property Trust, per the complaint.
Another argument from the plaintiffs—which include renters in more than 20 states—is that the use of the RMS created a shift in the industry, from a ‘heads in beds’ strategy that relied on high occupancy rates, to revenue maximization that promoted leaving units empty to avoid lowering rents. This constitutes a ‘parallel pricing strategy,’ per the complaint, in which competitors conspire on a strategy that artificially inflates prices.
The court will move to discovery next year, but an outcome in either direction would have tremendous impact on multifamily rental markets—and potentially on millions of people’s lives, given the crisis of affordable housing in the country.
In fact, the U.S. Department of Justice weighed in on behalf of the plaintiffs, urging the court to let the case move forward, as it is in the interest of the nation to see this issue resolved. The DOJ also argued that RealPage’s pricing algorithm constitutes both “concerted action” and an “unreasonable restraint” on trade, two tests of the Sherman Act which forms the basis of antitrust law in the United States—offering enough basis to deny RealPage’s motion to dismiss.
In a separate but related case, the Washington, D.C. attorney general filed its own antitrust lawsuit against RealPage in November.
RealPage has consistently denied that its RMS violates antitrust laws, and has questioned whether the plaintiffs can show a causal relationship between its software and rising rents.
Chava Gourarie can be reached at firstname.lastname@example.org.