Dive Brief:

• The Department of Justice and the Federal Trade Commission filed a brief last week in the antitrust case involving Yardi Systems and multiple landlords in the Western District of Washington, arguing against a motion to dismiss.
• In the case, a plaintiff accused Yardi and 18 landlords of unlawfully agreeing to use the software and data company’s pricing algorithms “to artificially inflate” apartment rents. In December, the defendants filed a motion to dismiss, claiming that landlords’ retention of some pricing discretion invalidated any price-fixing claim.
• In the brief, the DOJ and FTC, which enforce federal antitrust laws, argued that competitors must not agree to advertised list prices, even if actual rents vary from that starting point. “Moreover, where competitors agree to fix end prices, such price-fixing agreements are per se unlawful regardless of whether the conspirators adhere to or enforce compliance with the fixed prices,” the filing said.

Dive Insight:

In September 2023, Washington state resident Mckenna Duffy filed the antitrust class-action lawsuit in the U.S. District Court for the Western District of Washington against property management software company Yardi Systems and 18 apartment managers.

Duffy accused Yardi and the management companies of orchestrating a nationwide scheme to fix the cost of multifamily apartment rent. The suit contended that Yardi exchanged competitively sensitive and non-public information with clients through its automated pricing software, Revenue IQ (formerly RENTmaximizer) and that defendants engaged in direct conversations with their competitors about pricing through market surveys. 

Tenants have also sued software and data provider RealPage and several apartment landlords, bringing roughly 30 cases alleging antitrust violations by RealPage and several owners and operators of multifamily housing utilizing the Richardson, Texas-based company’s revenue management systems. While those cases were combined and advanced in a Nashville, Tennessee, federal court last year, Denver-based Apartment Income REIT and Dallas-based Pinnacle Property Management Services, owned by real estate services firm Cushman & Wakefield, have decided to settle.

In November, the DOJ filed a brief arguing that the antitrust case against RealPage and a number of apartment operators should move forward and that apartment operators’ use of a shared algorithm is illegal under the per se rule of antitrust law, assuming the allegations against the company are true. 

“The alleged scheme constitutes price fixing regardless of whether the competing landlords ever communicated with one another about prices,” DOJ lawyers wrote in a court filing.

Legal impact

In a recent blog post released after the filing, the FTC argued that landlords and property managers “can’t use an algorithm to evade the law banning price-fixing agreements” and “an agreement to use shared pricing recommendations, lists, calculations or algorithms” can be unlawful even if co-conspirators retain some pricing discretion.

“Using new technology to do it doesn’t change that antitrust fundamental,” wrote Hannah Garden-Monheit, director of the FTC’s Office of Policy Planning, and Ken Merber, deputy assistant director of the FTC’s Anticompetitive Practices II Division.

Even if rent prices among competitors deviate, they may still be breaking the law by using recommended starting prices, according to Garden-Monheit and Merber.

“Price deviations don’t immunize conspirators,” Garden-Monheit and Merber wrote. “Some things in life might require perfection, but price-fixing arrangements aren’t one of them. Just because software recommends rather than determines a price doesn’t mean it’s legal.” 

Given what they call “private equity-backed consolidation among landlords and property management companies,” Garden-Monheit and Merber argue that efforts to fight collusion have become even more critical.

“The considerable leverage these firms already have over their renters is only exacerbated by potential algorithmic price collusion,” Garden-Monheit and Merber wrote. “Algorithms that recommend prices to numerous competing landlords threaten to remove renters’ ability to vote with their feet and comparison-shop for the best apartment deal around.”

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