RealPage is a popular software provider for the multifamily industry. One of their products is a “revenue management” tool that suggests the highest price that its algorithms think each unit could get. Due to the popularity of the software and its observed ability to push rents up across entire metro areas, it has had a class action lawsuit filed against it. This lawsuit is obviously not great for RealPage (or some of its largest clients who were also named in the suit), but things seemed to have gotten worse.
Last year, a number of Senators called on the Department of Justice to investigate RealPage for possible breach of the Sherman Act, an anti-trust law that has been used to punish companies for anti-competitive activities since it was passed in 1890. Now it looks like the D.O.J. might be stepping in to prosecute RealPage after all. Last week, the D.O.J. filed a Notice of Potential Participation that was meant to inform the parties involved of a possible participation in the case.
The legal brief explained that: “The government has a particularly substantial interest in addressing the proper application of Section 1 of the Sherman Act, 15 U.S.C. § 1, to the use of algorithms by competitors to help set pricing. Companies’ use of algorithms in price setting, often in an effort to increase pricing, has become more prevalent in the modern economy. As a result, the issues involved in this case are of increasing significance to the application of antitrust law across the economy.”
The issues in the case are increasingly significant, but so far, the D.O.J. has expressed their desire to wait until the case is settled. “To minimize disruption to the Court and to the parties, the United States proposes filing its potential Statement of Interest by November 15, 2023—one week after the plaintiffs file oppositions to the pending motions to dismiss,” the brief said.
Any lawsuit is not good for a business, but when the Federal Government steps in, things get much worse. The Department of Justice has the ability to subpoena witnesses and can force the defense to provide certain evidence that a civil trial can not. The ability to bring more evidence to the court, as well as threaten witnesses with crimes if they are not truthful, could uncover damaging evidence that could be used against RealPage. The involvement of the D.O.J. also means that, unlike in a civil suit, there could be more than just monetary damages. If the D.O.J. does find that RealPage broke the Sherman Act, it could go as far as breaking the company up to prevent further abuses of power.
The timing the D.O.J. has chosen means that we will first see what happens in the civil suit before they announce whether or not they will investigate. That means that a win by RealPage might be a short-lived victory. If the D.O.J. thinks that justice has not been served in the civil courts, it might decide to take matters into its own hands.