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DOJ sues realpage for algorithmic pricing scheme that harms renters

justice.gov

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Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#11

Post by tootie »

bearjaws wrote: post #7

I am very curious how this will play out. On one hand, I have seen it first hand here in Orlando that EVERY apartment complex uses the same software, all of them. At the same time, rent has gone up 300% in 10 years, or around 10% per year. FTA it states that it was the fact that they all shared all their pricing and inventory data with RealPage, which then determined the price using algorithms and therefore rental pr…

Yeah, there's nothing inherently wrong with algorithmic pricing. Issues would start to occur if the pricing was actively manipulated and RealPage was used by so many landlords in some geographic areas that competition broke down. That may be hard to prove.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#12

Post by mistrial9 »

infecto wrote: post #8
ajhurliman wrote: post #5

This blows my mind that they're actually pursuing this, the two complaints are that they schemed to decrease competition among landlords and that they monopolized commercial revenue management software. Both are completely bogus. You could say the entire profession of appraising real estate prices "decreases competition" if the first complaint is valid. And they certainly haven't monopolized the software space, I'd n…

It’s amazing your confidence when it sounds like you don’t even participate in the top N landlord space for a given market. IIRC it has already been demonstrated that RealPage had the lion shares of the total units in certain markets. The question is not about rent predictions but having asymmetric information that allows users of the site to effectively participate as a cartel. I am a big proponent of free markets b…

dismissive and slightly insulting replies to concerns about price are daily business

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#13

Post by trinsic2 »

infecto wrote: post #8
ajhurliman wrote: post #5

This blows my mind that they're actually pursuing this, the two complaints are that they schemed to decrease competition among landlords and that they monopolized commercial revenue management software. Both are completely bogus. You could say the entire profession of appraising real estate prices "decreases competition" if the first complaint is valid. And they certainly haven't monopolized the software space, I'd n…

It’s amazing your confidence when it sounds like you don’t even participate in the top N landlord space for a given market. IIRC it has already been demonstrated that RealPage had the lion shares of the total units in certain markets. The question is not about rent predictions but having asymmetric information that allows users of the site to effectively participate as a cartel. I am a big proponent of free markets b…

I'm glad these questions are being raised and bringing more awareness. I always suspected there was something that was going on to artificially raise rent prices. It sounds like collusion to me.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#14

Post by adolph »

I think RealPage foot-gunned their corporate structure and marketing by being so blatant about it. If they had set up a separate structure that offered "benchmarking" like what is used in healthcare[0] and other industries, they could have performed the same service but avoided legal trouble.

0. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5379508/

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#15

Post by cjbgkagh »

bearjaws wrote: post #7

I am very curious how this will play out. On one hand, I have seen it first hand here in Orlando that EVERY apartment complex uses the same software, all of them. At the same time, rent has gone up 300% in 10 years, or around 10% per year. FTA it states that it was the fact that they all shared all their pricing and inventory data with RealPage, which then determined the price using algorithms and therefore rental pr…

I think the major difference is price is set at the margin, so only the marginal renter has to use the software in order to move the market. Since rental owners, like wealth, exist on a power law curve large numbers of properties are owned by very few people. I.e. it is possible for both the average landlord to not be using the software but the average property is owned by a landlord who is.

The other thing is that normally there is an advantage to breaking the collusion which is what generally prevents them. AFAIK the software is capable of punishing people who break from the suggested price so this pushes the cost of maintaining the collusion onto the participants who have to put up with vacancies for longer than they would otherwise.

So in my view you can have an implicit collusion, or a collusion in effect even without an explicit collusion and with most of the participants not participating in it.

I also think this is one of the most important points of contention of our time. Our ponzi economy requires extracting monopolistic rents which is absolutely crushing the middle class and younger people. When I last visited SF downtown was a ghost town with many of the businesses that survived Covid being driven out by high rents - it appears that rental collusion has already been more damaging than a global pandemic.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#16

Post by lukev »

Some quotes from the filing:

> Discussing a different RealPage product, another landlord said: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing . . . .”

> In fact, as RealPage’s Vice President of Revenue Management Advisory Services described, “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”

> Its executives are blunt: They want landlords to “avoid the race to the bottom in down markets.” Sometimes RealPage is even more direct, acknowledging that its software is aimed at “driving every possible opportunity to increase price”

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#17

Post by toomuchtodo »

ajhurliman wrote: post #5

This blows my mind that they're actually pursuing this, the two complaints are that they schemed to decrease competition among landlords and that they monopolized commercial revenue management software. Both are completely bogus. You could say the entire profession of appraising real estate prices "decreases competition" if the first complaint is valid. And they certainly haven't monopolized the software space, I'd n…

"Price fixing by algorithm is still price fixing," regardless of fanciness or cleverness.

https://www.ftc.gov/business-guidance/blog/2024/03/price-fix...

https://www.ftc.gov/system/files/ftc_gov/pdf/YardiSOI-filed%...

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#18

Post by bick_nyers »

bearjaws wrote: post #7

I am very curious how this will play out. On one hand, I have seen it first hand here in Orlando that EVERY apartment complex uses the same software, all of them. At the same time, rent has gone up 300% in 10 years, or around 10% per year. FTA it states that it was the fact that they all shared all their pricing and inventory data with RealPage, which then determined the price using algorithms and therefore rental pr…

Housing is pretty inelastic. I think people are just willing to suffer financially to avoid the fate of homelessness. Just because there aren't vacancies anywhere doesn't mean that the price is fully justified, because housing will take priority over groceries for a lot of people.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#19

Post by jasode »

>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.

I think the "private prices" + "autoaccept" + "compliance" is the key misbehavior that gets RealPage into legal trouble.

If competitors want to converge on prices in a legal manner, they have to do out in the open via "price signaling" via public posting of prices. That's how it's legally possible for competitors in other industries to do it:

- gas stations looking at each others signs of prices and quickly adjusting to match;

- e-auctions like Ebay/Reverb showing a seller what the previous range of sold prices were;

- Kelly "Blue Book" showing current used car market prices

- Zillow publicly showing rental rates, etc.

Neither the platform nor the sellers in those examples get in trouble for "price fixing".

In contrast, the privately shared pricing with compliance monitoring by the platform is too coordinated to avoid legal scrutiny.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#20

Post by skipkey »

tootie wrote: post #11
bearjaws wrote: post #7

I am very curious how this will play out. On one hand, I have seen it first hand here in Orlando that EVERY apartment complex uses the same software, all of them. At the same time, rent has gone up 300% in 10 years, or around 10% per year. FTA it states that it was the fact that they all shared all their pricing and inventory data with RealPage, which then determined the price using algorithms and therefore rental pr…

Yeah, there's nothing inherently wrong with algorithmic pricing. Issues would start to occur if the pricing was actively manipulated and RealPage was used by so many landlords in some geographic areas that competition broke down. That may be hard to prove.

So I worked for RealPage for a few years in the late 90s and again in the mid 2000s, and at the time they didn’t hold a majority of the market. But it would not surprise me now if they held a majority of the market in large complexes today. At the time they were growing mostly by acquisition of competitors.
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