Dive Brief:
- RealPage doesn’t deny that private information goes into calculating its pricing suggestions. However, it said this week that the data contributes to lower rents, not to higher housing prices as the Department of Justice and eight states asserted in a lawsuit filed in federal court in North Carolina on Friday.
- Nonpublic information “yields lower advertised rents” than what would otherwise be suggested by RealPage, said Stephen Weissman, an antitrust attorney for Gibson Dunn, who represents the Richardson, Texas-based data and software company, on a call with reporters earlier this week.
- Weissman said much of the data that RealPage collects isn’t used in its pricing recommendations, which are weighted by public and private information that comes from signed lease prices. He said clients have no idea what competitive information is included in the mix. “We aggregate it and we anonymize it,” he said.
Dive Insight:
The civil suit alleges that RealPage violated the Sherman Act, which prohibits unfair monopolies. The Justice Department is seeking changes to RealPage’s revenue management software but no monetary damages.
The DOJ alleges that RealPage’s agreements and conduct harm the competitive process in local apartment markets across the United States. It contends that the company encourages loyalty to its algorithm’s recommendations through various methods, including an “auto accept” functionality and the use of pricing advisors who monitor landlords’ compliance.
Through that functionality, RealPage’s software can maximize price increases, minimize price decreases and maximize landlords’ pricing power, according to the DOJ. The Justice Department also said the company “trained” landlords to limit concessions and discounts to apartment residents.
However, Weissman claims there isn’t a direct connection between RealPage’s product and higher rents. He cited New York City, San Francisco and Chicago — some of the most expensive rental markets in the country. The firm’s software has relatively low absorption in those metros, according to Weissman.
Unlike recent class-action suits filed against the company, the lawsuit did not name RealPage clients. That “underscores [the] falsehoods of the other cases,” which allege a conspiracy, according to Weissman.
RealPage would have been open to discussing changes in the product if it were approached, according to Weissman. “They didn’t ask for changes,” he said. “They just fired off a lawsuit.”
Overall, RealPage’s revenue management product only yields about 5% or 6% of the firm’s annual revenue. “This is a relatively small product,” Weissman said.
But the firm is committed to defending its ability to operate the product. “We feel strongly about its legality,” Weissman said.
Mary Salmonsen contributed to this report.
