Reasons for DOJ’s Refusal to Dismiss RealPage Lawsuit

By Franco Faraudo

The threat of the class action lawsuit against RealPage for its use of “rent optimization” software just went up. The suit already threatens the company and many of its largest clients with potentially billions of dollars of damages from overinflated rent. RealPage’s lawyers have argued to have the case thrown out because “courts have little to no experience evaluating whether the use of revenue management software is unlawful under Section 1 [of the Sherman Antitrust Act].”

But yesterday, the Department of Justice issued a Statement of Interest to the judge overseeing the case in favor of the case not being dismissed. The brief first dismissed the idea that a new type of technology was above the normal definition of anti-competitive behavior, “Antitrust law does not become obsolete simply because conspirators find new ways to act in concert.” In fact, the DOJ sees the use of software to fix prices as an even bigger threat than the traditional methods, “Algorithms are the new frontier. And, given the amount of information an algorithm can access and digest, this new frontier poses an even greater anticompetitive threat than the last.”

The DOJ’s argument revolved around the definition of what is called “concerted action.” This is one of the things that needs to be proved in order for there to be an illegal collusion under the Sherman Act. It argued against the notion that companies didn’t need to express their agreement to fix prices in order to be in violation of antitrust law. “Such tacit agreements can involve merely a ‘wink and a nod,'” the brief said. It also dispels the idea that the decision to engage in illegal activity at the same time. “Importantly, establishing concerted action under Section 1 does not require any showing of simultaneous action—or even action that is close in time,” the brief states.

The companies that used the software also don’t get a pass because they outsourced their pricing decision to a software program. This, according to the DOJ, is akin to outsourcing important decisions to another person or company, “courts recognize that the joint delegation of competitive decisions constitutes concerted action under Section 1 [of the Sherman Act].

Since there are few past cases to draw from on how to treat software as it pertains to cartel-like activities, many had expected the class action suit to be thrown out. But with the high-profile nature of the case and the emotional and political baggage that comes with high rent prices, the DOJ has decided to step in to make sure that didn’t happen. There is still no certainty on whether or not a court will find RealPage and its clients guilty of anticompetitive behavior. But now, thanks to the DOJ, it is highly likely that the case will get its day in court. Whatever the court decides to rule, it will then become the precedent for future decisions, making this case of immense importance not only to the real estate industry but to every industry that uses software to determine the price of its products.

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