DOJ sues realpage for algorithmic pricing scheme that harms renters

Algorithmic pricing that learns to tacitly collude is a hot area of study in computer science and economics. For example, if you train simple online learning algorithms to adjust prices, sometimes they can learn to keep prices high or to take turns winning customers, rather than just competing. People have found some empirical evidence of this on platforms like Amazon where a lot of small sellers use pricing bots.

However, it seems this is a more of a hybrid situation. A big part of the complaint is just all these incriminating emails and documents where RealPage appears to be coaching landlords to avoid lowering rents or giving concessions, independent of the software.

At the same time, there was an algorithmic component, which the customers appreciated: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing...”

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

#5

Post by ajhurliman » Fri, Aug 23, 2024, 4:24 PM UTC

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 never even heard of RealPage until the lawsuit, I used Rentometer. There are dozens more, predicting rent prices is hardly a novel idea.

I think that was like one of the toy problems in Andrew Ng's online ML course.

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

#6

Post by tyingq » Fri, Aug 23, 2024, 4:30 PM UTC

currymj wrote: post #4

Algorithmic pricing that learns to tacitly collude is a hot area of study in computer science and economics. For example, if you train simple online learning algorithms to adjust prices, sometimes they can learn to keep prices high or to take turns winning customers, rather than just competing. People have found some empirical evidence of this on platforms like Amazon where a lot of small sellers use pricing bots. Ho…

Interesting as airlines have been doing this for a really long time.

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

#7

Post by bearjaws » Fri, Aug 23, 2024, 4:30 PM UTC

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 properties weren't competing against one another. When to me, there are simply no spare apartments, I've seen some complexes down to 1-2 units by the end of July.

Lots of systems using competitors data and algorithms to price items, so was it simply the fact that too many people used RealPage, what if nearby properties didn't use RealPage and the rents went up anyway?

I am not sure if this is price fixing, I don't know any landlords that use it, every home I've rented was with someone who owned 1-2 extra properties and just used Zillow or Craigslist.

That being said, I price my rental properties against what similar square footage gets at nearby apartments... Sooo if they are going up my rent is going up as well, and I bet most landlords do this.

So we've ended up accidentally price fixing the market I guess? I think it really depends on the internal communication and what they sold to landlords.

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

#8

Post by infecto » Fri, Aug 23, 2024, 4:33 PM UTC

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 but I think this is a worthy question to answer. When your algorithm controls more than 50% of pricing in a market does that count as collusion and how do you handle it. It seems like it might effectively eliminate the market price as you the dominant player are setting it.

It might get thrown out but I believe it’s naive and brash to just dismiss it so easily.

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

#9

Post by iambateman » Fri, Aug 23, 2024, 4:35 PM UTC

This is probably the best thing the justice dept can do to help promote a competitive market for renters.

Also…we need the government to encourage housing policy which produces a lot more housing stock.

The long-term reason housing is expensive is because there aren’t enough good houses and zoning has a lot to do with that.

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

#10

Post by game_the0ry » Fri, Aug 23, 2024, 4:38 PM UTC

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…

I wouldn't be happy either if I was a landlord.

But the landlord-ing business is a tough business, and business is about to get tougher.