Company that makes rent-setting software for landlords sued for collusion

RealPage worked with some of the nation’s largest landlords to raise rents, says lawsuit.

Read the whole story

 

[windnwar]

In a whole lot of industries, there is a sort of "soft cartel" anyhow. I mean, I do hope they bust this app and the landlords using it, but. . .

In most industries, there is at the minimum, all participants tracking the pricing of "the market" and raising prices accordingly.

I think the difference is say your local grocery store isn't plugging all their pricing data into a third party system that their competitors are also using and it then tells both stores what to sell a bottle of Hines Ketchup for. This is basically doing that and more. It's pretty blatantly a cartel, created by a guy who literally got busted for doing the same thing in the airline biz, so now he just added a couple more hoops to make it look legit this time.

I hope that company gets roasted, but I won't hold my breath.

 

[windnwar]

The complaint alleges that the defendants manage more than 16 million rental units. That caused me to question how big the entire market is. This site: https://www.statista.com/statistics/104 ... homes-usa/ claims that as of October 2021 there were 37.75 million MDU rental units in the US. That would mean that RealPage has more than 42% of the total MDU units under their "control". It has been a long time since law school, but that would seem to me to be a big enough share to convince a court that the alleged actions had an actual impact on pricing.

And it looks like as they dig into it via discovery I'm going to bet they find in the largest most expensive markets their share is probably more like 70 or 80 percent of units available.

 

[windnwar]

A lot of people are wondering in the comments if this is illegal or just a innovative use of software.

If you read the pro-publica article, it's clearly collusion.

All these landlords (mostly big companies, but not all of them) are giving their data to an algorithm, and that algorithm tells them what prices they should be selling at.

Now replace the word "algorithm" with "a guy named Bob."

All these landlords are giving their data to a guy named Bob, and Bob is telling them what prices they should be selling at.

If it's illegal for "a guy named Bob" to do then it's also illegal for an algorithm to do.

Agreed.

Which Federal law exactly is Bob violating though?

As far as I'm aware, that would just be called a 'pricing consultant' or a 'pricing analyst' and that is a legal career path with many available jobs as a quick Google search will show.

What is a Pricing Analyst?

A pricing analyst is responsible for analyzing competitor pricing matched with market expectations to determine the ideal target price for products of the business. Duties include providing thorough analytical breakdowns of pricing structures and sales funnels of similar competitor products and services and identifying specific strategies used in pricing models of the same. Reports are written in order to evaluate the findings and to propose the results to the relevant departments for effect. Depending on the company, pricing analysts may progress into managerial roles involving financial account management and analysis.

https://www.glassdoor.com/Job-Descripti ... nalyst.htm

As far as I can tell that is exactly what the software is doing.

Are you saying the entire field is illegal somehow and nobody has noticed, or am I missing your point?

If everyone is using the same consultant, yeah, the same price fixing and collusion arguments would apply.

Can you cite the law?

IANAL, but I believe horizontal price fixing is illegal under section 1 of the Sherman Act. Under CA law it violates Business & Professions Code § 16726.

But you could have Googled that yourself. So I assume you're leading up to making some kind of argument that price fixing isn't illegal?

If so, go for it.

No, 'price fixing' is illegal, but I'm not sure this actually qualifies.

This is just pricing analysis.

For one example of similar behavior which is entirely legal, and does not constitute price fixing, the airline industry works together to raise and lower their prices without directly colluding. How? Pricing analysts.

I will let the Atlanta Journal Constitution break it down.

The industry usually moves together on general fare increases, with one or two initiating them and then waiting to see if others follow. If so, the increase sticks. If not, it’s typically withdrawn.

https://www.ajc.com/business/airlines-n ... dcG2oIGCP/

That's 100% legal. If I own Jacks Lobster House and I'm across the street from you, and you own Crunchy's Crustacean Nation, and I put up a sign that says 'DUE TO LOBSTER COST INCREASES OUR PRICES HAVE DOUBLED,' and you see that sign and decide 'hey, that's a good idea' and double your prices also, that's 100% legal. That's not price fixing. That's not collusion.

The burden of proof is on those claiming collusion. They do not have to prove themselves innocent. Challengers here must prove that communications exist which support an allegation of collusion. In the case above, that's not collusion even if you can prove Crunchy raised his price as a direct result of seeing Jack's sign. You would have to additionally prove that Jack intended that result by putting up his sign, which would be nearly impossible without Jacks confession.

If those two diners however could also see what the average order per customer is, how much tips each customer is leaving, what's the most popular items, all the cost of all the materials and expenses and then suggested the prices, which is what Realpage is actually doing, their would be problems. Sitting at a table discussing this is illegal, handing it all to a computer everyone uses to do it for you instead doesn't make it legal, but the airline guy the created this that got busted for it before basically thinks do it on a computer but make the person at the site click a button, required to be clicked in realpages favor at least 80% of the time somehow makes it legal.

I'm failing to see how that flies in any sane sense, and if it does, then it's obvious new laws are needed asap to stop it.