The US Justice Department today announced it filed an antitrust lawsuit against "six of the nation's largest landlords for participating in algorithmic pricing schemes that harmed renters."
One of the landlords, Cortland Management, agreed to a settlement "that requires it to cooperate with the government, stop using its competitors' sensitive data to set rents and stop using the same algorithm as its competitors without a corporate monitor," the DOJ said. The pending settlement requires Cortland to "cooperate fully and truthfully... in any civil investigation or civil litigation the United States brings or has brought" on this subject matter.
The US previously sued RealPage, a software maker accused of helping landlords collectively set prices by giving them access to competitors' nonpublic pricing and occupancy information. The original version of the lawsuit described actions by landlords but did not name any as defendants.
The Justice Department filed an amended complaint today in order to add the landlords as defendants. The landlord defendants are Greystar, LivCor, Camden, Cushman, Willow Bridge, and Cortland, which collectively "operate more than 1.3 million units in 43 states and the District of Columbia," the DOJ said.
"The amended complaint alleges that the six landlords actively participated in a scheme to set their rents using each other's competitively sensitive information through common pricing algorithms," the DOJ said.
The phrase "price fixing" came up in discussions between landlords, the amended complaint said:
For example, in Minnesota, property managers from Cushman & Wakefield, Greystar, and other landlords regularly discussed competitively sensitive topics, including their future pricing. When a property manager from Greystar remarked that another property manager had declined to fully participate due to "price fixing laws," the Cushman & Wakefield property manager replied to Greystar, "Hmm... Price fixing laws huh? That's a new one! Well, I'm happy to keep sharing so ask away. Hoping we can kick these concessions soon or at least only have you guys be the only ones with big concessions! It's so frustrating to have to offer so much."
FBI raided Cortland office
Cortland manages over 80,000 rental units in 13 states. The FBI raided its Atlanta office in May 2024 as part of a criminal investigation.
"Cortland is pleased to announce the US Department of Justice filed a proposed settlement that would resolve the Antitrust Division's civil investigation into Cortland related to antitrust violations in the multifamily housing industry," Cortland said in a statement provided to Ars today.
Cortland's statement said that last month, "the Antitrust Division informed Cortland that it had closed its criminal investigation into pricing practices in the multifamily industry. As a result, Cortland and its employees are no longer subject to the criminal investigation that motivated the Department of Justice's May 2024 search at Cortland's headquarters in Atlanta."
The settlement, if approved in federal court, would prohibit Cortland from accessing or using external nonpublic data from RealPage or other sources. Cortland said in its statement that it has developed its own software for managing revenue.
"We believe we were only able to achieve this result because Cortland has invested years and significant internal resources into developing a proprietary revenue management software tool that does not rely on data from external, non-public sources," Cortland said.
RealPage fights lawsuit
Rental companies have previously denied using software to collectively set prices in response to class action lawsuits. In December 2022, the National Multifamily Housing Council trade group said that "the highly fragmented nature of the rental apartment industry fosters competitive pricing, not anticompetitive behavior. No single owner or operator can 'set' rents for an entire market because other owners can always price over or under based on numerous circumstances. We believe rents in every market are dictated by the dynamics of that local market—the supply of housing, the demand for housing, economic conditions and more."
RealPage filed a motion to dismiss the US lawsuit in early December. The company has said its software "benefits both housing providers and residents," and "makes price recommendations in all directions—up, down, or no change—to align with property-specific objectives of the housing providers using the software." Landlords don't have to follow the recommendations, the company says.
The Justice Department says that landlords did more than use RealPage in the alleged pricing scheme. "Along with using RealPage's anticompetitive pricing algorithms, these landlords coordinated through a variety of means," such as "directly communicating with competitors' senior managers about rents, occupancy, and other competitively sensitive topics," the DOJ said.
There were "call arounds" in which "property managers called or emailed competitors to share, and sometimes discuss, competitively sensitive information about rents, occupancy, pricing strategies and discounts," the DOJ said.
Landlords discussed their use of RealPage software with each other, the DOJ said. "For instance, landlords discussed via user groups how to modify the software's pricing methodology, as well as their own pricing strategies," the DOJ said. "In one example, LivCor and Willow Bridge executives participated in a user group discussion of plans for renewal increases, concessions and acceptance rates of RealPage rent recommendations."
DOJ: Firms discussed “auto-accept” settings
The DOJ lawsuit says RealPage pushes clients to use "auto-accept settings" that automatically approve pricing recommendations. The DOJ said today that property rental firms discussed how they use those settings.
"As an example, at the request of Willow Bridge's director of revenue management, Greystar's director of revenue management supplied its standard auto-accept parameters for RealPage's software, including the daily and weekly limits and the days of the week for which Greystar used 'auto-accept,'" the DOJ said.
Greystar issued a statement saying it is "disappointed that the DOJ added us and other operators to their lawsuit against RealPage," and that it will "vigorously" defend itself in court. "Greystar has and will conduct its business with the utmost integrity. At no time did Greystar engage in any anti-competitive practices," the company said.
The Justice Department is joined in the case by the attorneys general of California, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, North Carolina, Oregon, Tennessee, and Washington. The case is in US District Court for the Middle District of North Carolina.