DOJ files antitrust lawsuit against RealPage 

The U.S. Department of Justice has its fingers in several real estate pies. While still scrutinizing the buyer agent commission system and continuing a years-long investigation into NAR policies — plus weighing in on litigation involving Zillow — the agency is now delving into another segment of the real estate industry: Rentals.

RealPage 'determines the price a renter will pay'

The DOJ, along with attorney generals from eight states, filed a civil antitrust lawsuit against RealPage Inc. over its software. The complaint alleges that the proptech company uses a rent-pricing algorithm to help landlords figure out apartment rates — something that amounts to price-fixing.

The 115-page complaint was filed in U.S. District Court for the Middle District of North Carolina. Seven other states joined the DOJ and North Carolina in the lawsuit: California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington.

In a news release, U.S. Attorney General Merrick Garland said RealPage goes beyond providing recommendations for rent levels and "actively polices landlords' compliance."

"A large number of landlords effectively agree to outsource their pricing decisions to RealPage by using an 'auto accept' setting, which effectively permits RealPage to determine the price a renter will pay," Garland said.

This business model is hampering the natural forces of competition, said Assistant Attorney General Jonathan Kanter, who pushed back on RealPage's statement that its model reflects a "rising tide raises all ships" philosophy in action.

"For RealPage, that rising tide of rents means more profits. For landlords, that rising tide means more revenues from higher rents," Kanter said. "But renters pay the price. For renters, that rising tide means less money for food, healthcare, childcare and education. For renters, that rising tide means less money for families to make ends meet."

Dominance a result of 'ill-gotten information'

Along with allegations that the product "distorts competition to the detriment of renters," the DOJ also noted RealPage's dominance in the marketplace. The company controls at least 80% of the market, according to the complaint.

"Its dominant position is protected by substantial data advantages due to its massive reservoir of ill-gotten competitively sensitive information from competing landlords," according to the complaint.

What RealPage has to say

On its website, RealPage defended its product, noting that it often recommends lowering rent prices whenever the supply and demand dynamics indicate that's needed. The company is owned by the private equity firm Thoma Bravo.

"If renters are not willing to pay a published price, then the system will very quickly recommend lowering that price," according to the FAQ section of the website.

Timing of the suit

The lawsuit comes at a time when the U.S. is trying to tame inflation, and rent prices have been a major driving force in keeping it high. While inflation has been coming down in recent months, the shelter category spiked in 2022 and 2023 and has been slower to drop than other key measures.

Meanwhile, the real estate industry continues to wait and see what the DOJ's next move will be as it keeps an eye on commissions practices following the rule changes that recently went into effect. NAR recently told members that the DOJ is watching closely to see if agents abide by the Aug. 17 practice changes and warning them not look for workarounds.

Earlier this year, the courts decided that the DOJ could reopen its investigation into industry practices based on rules set by NAR.