Target of Justice Department’s rental price fixing lawsuit registers as a Hawaiʻi business

RealPage Inc. registered as a business with the Hawaiʻi Department of Commerce & Consumer Affairs on Sept. 11, 2024, or 19 days after the US Department of Justice announced an antitrust lawsuit against the property management software company headquartered in Richardson, Texas.

The Hawaiʻi business registration filing lists Dana Jones as chief executive officer, president and director; along with executive officers Vinit Doshi, David Monk and Akash Raj. Each has profiles on RealPage Inc.’s online “meet our management team” page.

The lawsuit filed Aug. 23 with the Attorneys General of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington, alleges that RealPage Inc. engaged in an illegal scheme to rig apartment rental prices using its algorithmic pricing software.

The Justice Department did not reach out to the state of Hawaiʻi to join in the lawsuit, according to Toni Schwartz, public information officer with the Hawai‘i Department of the Attorney General.

“Neither the Department of the Attorney General’s research nor information received from the US DOJ indicated wide-spread use of the software in Hawai‘i,” she said in an email Friday morning morning in response to a query from Maui Now.

RealPage Inc. did not respond Maui Now’s emailed request for comment since Friday morning.

The company is fighting a similar antitrust lawsuit filed in US District Court in Nashville, Tenn. Among other things, the company maintains the plaintiffs’ case against rental housing owners and managers advances an “implausible theory” that “any company that licenses any RealPage revenue management software, including the 49 defendants (in the Tennessee case) . . . without doing anything more, has entered into an agreement to fix rental prices that constitutes a per se violation of the antitrust laws.”

Maui attorney and housing policy expert Jason Economou brought the Justice Department’s more recent antitrust lawsuit against RealPage to the attention of Maui County Council members Monday evening during a discussion of rent stabilization before the Housing and Land Use Committee.

The committee will reconvene its meeting at 9 a.m. Sept. 25. A report on comments to the committee can be found here.

The public and Council’s interest in rent stabilization comes amid Maui’s ongoing housing crisis. According to the University of Hawaiʻi Economic Research Organization’s third quarter forecast for 2024, Maui rental costs have risen 11% higher than a year ago, with typical rents in the $4,000-per-month range, based on Zillow estimates that coincided with Federal Emergency Management Agency’s direct lease program for wildfire-displaced residents. In that program, FEMA offered landlords rents well above market prices to entice operators of vacation rentals to convert those for use by fire survivors, UHERO reported.

In an exchange of emails with Maui Now, Economou said he didn’t know if RealPage algorithmic pricing software is being used by Maui rental management companies, or if there are similar issues with other software applications.

However, “it is still important for consumers and government officials to recognize that tools like RealPage are being developed and used by Realtors and property managers throughout the country as part of their standard practices, with the intent of getting an advantage over consumers and gaming the ‘free market,’ ” he said in an email.

Meanwhile, real estate industry lobbyists, including the Realtors Association of Maui, “also rail against government interventions that might assist consumers in the housing and rental markets because it goes against the sanctity of the ‘free market,’ ” he said. “These ‘free market’ arguments are inherently dishonest, as they have no problem with intervention when it benefits them.”

Realtors Association of Maui President Lynette Pendergast issued a statement condemning the use price-fixing technology, such as that allegedly used by RealPage.

“We do not use RealPage or any similar technology, and we are committed to transparency and fair practices,” Pendergast said in a statement. “We are not aware of any price-fixing technology in Maui County. Our Multiple Listing Service (MLS) is focused on sales transactions, with minimal use for rentals. We stand firmly against any actions that undermine the integrity of our market.”

Economou, former government affairs director for the Realtors Association of Maui, said national Realtor groups have built “the most intricate and well-organized lobbying apparatus in the country” with the purpose of influencing government officials and creating a market landscape “that maximizes benefit for their members with little regard for the impacts on anyone else.”

“This was true of their commission splitting practices, and it is true of their uses of technology,” he said. “These lobbying organizations disguised as nonprofit trade associations are quick to oppose intervention that could negatively impact profitability for their industry by arguing about the importance of the ‘free market,’ and willing to throw lots of money into races against politicians who question their practices at any level. Lobbying for the Realtors is like playing for the Harlem Globetrotters. The game is so rigged that there isn’t really a question of who will win in the end.”

The Justice Department said the goal of RealPage’s algorithmic pricing software is to unlawfully decrease competition among landlords in apartment pricing and 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 department’s announcement said.

The lawsuit was filed in the US District Court for the Middle District of North Carolina. It alleges that RealPage violated Sections 1 and 2 of the Sherman Act. Section 1 prohibits combinations or conspiracies in restraint of trade, and section 2 prohibits monopolization, according to the National Association of Attorneys General.

The department’s complaint says that RealPage contracts with competing landlords who agree to share with the software company nonpublic, competitively sensitive information about rental rates and other lease terms. That information is used to train and run RealPage’s algorithmic pricing software. It then makes recommendations, including rental pricing and other terms, for participating landlords.

“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,” the complaint says. “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.”

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…”

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.

RealPage has approximately 80% market share of commercial revenue management software for multi-family dwellings in the United States, according to the Justice Department.

The Justice Department’s lawsuit has some roots in online investigative reporting by ProPublica, based in New York City. See, “Rent Going Up? One Company’s Algorithm Could Be Why.”