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

 

[Basil Forthrightly]

Just having the software wont be enough proof for court. It will have to be shown that they did use it to cartel and not compete.

Ah, so they'll play the "prove our state of mind" card in court.

Which is yet another example of the way poor people crime is treated differently than rich people crime. Poor people crimes are just defined as "You did the action." You took the loaf of bread. You voted when you weren't supposed to (sometimes even despite being told you could). Rich people crime has the requirement that you prove that, not only did the person have the intent to do wrong, but that they knew that it was a crime as well. In a just world, things like this program wouldn't be able to be used as an excuse for "We're not actually colluding." Although, in a just world, no engineer would ever work on such an evil project.

However, antitrust law has plenty of facets where "state of mind" isn't relevant and effect on the market as a whole is the determining factor. Plenty of antitrust criminal convictions have been won without addressing "state of mind" issues; as far as I know, "state of mind" comes into play more in regulatory and civil antitrust enforcement, in determining penalties.

 

[Faustius23]

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.

I've never heard of an analyst that requires management to justify why they are departing from the analyst's recommendation.

This implies a relationship is of a different nature than just advisory.

Would be interesting to know what happens if a company signs up for this service then repeatedly refuses to keep properties off the market when instructed, and refuses to not undercut the recommended prices.

We'll probably learn that during discovery.

 

[uthallan]

i keep having thoughts of chairman mao coming back as a zombie or something this halloween season

 

[JPMeyer]

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.

If they were only using public pricing information there would be little question as to the legality. There might be a small crack in the door with regard to keeping units off the market when the software believes there to be an oversupply, but it's a hard argument to make.

By making use of internal client-specific data as to actual rents being charged, though, there is a strong argument that illegal collusion is occurring.

This has already been hashed out with regard to airlines. They tried using their GDSes in a similar way and got spanked for it decades ago. What they do now is use public pricing signals. It's still, in some sense, collusion, but it's not illegal because they do it in public and aren't making backroom agreements with each other. Everybody who cares to look can see exactly what they're doing.

One airline thinks prices should go up, so they increase their published fares. If the rest of the market agrees, they quickly follow suit. If nobody else does, the original airline reverts the change, usually within a few minutes. It's the normal means of price discovery in a free market, just sped up.

According to the complaint, an airline exec involved in pricing decisions when the airlines got spanked as you describe is behind this rental pricing software. I thought that was a very nice touch in a well crafted complaint. In addition, this plan seems to go much further than just price signaling by actually urging the landlords to turn over price setting to the software, with "compliance" mechanisms in place when landlords stray from the chosen path. This seems pretty bold. I wonder how much legal advice this group of defendants sought or whether they have some magic bullet defense.

 

[Bondles_9]

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.

If they were only using public pricing information there would be little question as to the legality. There might be a small crack in the door with regard to keeping units off the market when the software believes there to be an oversupply, but it's a hard argument to make.

By making use of internal client-specific data as to actual rents being charged, though, there is a strong argument that illegal collusion is occurring.

This has already been hashed out with regard to airlines. They tried using their GDSes in a similar way and got spanked for it decades ago. What they do now is use public pricing signals. It's still, in some sense, collusion, but it's not illegal because they do it in public and aren't making backroom agreements with each other. Everybody who cares to look can see exactly what they're doing.

One airline thinks prices should go up, so they increase their published fares. If the rest of the market agrees, they quickly follow suit. If nobody else does, the original airline reverts the change, usually within a few minutes. It's the normal means of price discovery in a free market, just sped up.

Nope. If they were only using public information, this would still be price fixing. Yes, there's information asymmetry between landlords and renters and that makes the situation worse, but even if the renters had access to 100% of the information that's in RealPage landlords would still be colluding to increase rents instead of competing with each other.

 

[jimlux]

This is in some ways the same sort of price fixing from "salary survey companies" - everyone agrees to provide salary data, and the company provides "guidelines" for various levels. Companies, individually, agree to use the guidelines.

Furthermore, this is a bit more blatant - they're optimizing vacancy rates and holding units off market to raise prices overall. It's the overall that's the problem. If it were a single landlord, others would swoop in and undercut them. Here they've found a way to avoid actually getting in a room together and agreeing - they use an App to disintermediate the transaction.

 

[tz1]

It's not just the prices. The article mentions staggering lease renewals. I rented from greystar a few years ago and they initially gave me a 11 month lease, which seemed like an odd unit of time to pick (but where happy to renew). I assumed they wanted to avoid rental protections for longer term leases but after reading this they probebrly wanted to stagger the start/end dates to artificialy drive the supply/demand curve.

They are not doing that to affect supply/demand. IF thats what they wanted to do then they would just simply not list it. These uneven lease terms are to limit how long a unit is vacant. EG: they dont want the unit vacated in DEC because it will sit until spring. So they have the lease term end in March (or later) when more people are looking to move.

 

[JPMeyer]

It's not just the prices. The article mentions staggering lease renewals. I rented from greystar a few years ago and they initially gave me a 11 month lease, which seemed like an odd unit of time to pick (but where happy to renew). I assumed they wanted to avoid rental protections for longer term leases but after reading this they probebrly wanted to stagger the start/end dates to artificialy drive the supply/demand curve.

They are not doing that to affect supply/demand. IF thats what they wanted to do then they would just simply not list it. These uneven lease terms are to limit how long a unit is vacant. EG: they dont want the unit vacated in DEC because it will sit until spring. So they have the lease term end in March (or later) when more people are looking to move.

The complaint states:
55. One Lessor explained that, using RealPage, Lessors are “now able to stagger lease expirations throughout the month, effectively cutting down on frictional vacancy loss as well as concessions” on price. That Lessor continued that by staggering lease renewals, Lessors have “leveled the lease expirations throughout the year to better match the historical demand for each community, thus positioning us [Lessors] for even higher rent growth.”

That sure sounds like the landlords were using the software to manage supply/demand. These plaintiff lawyers really did their homework and sprinkled the complaint with lots of quotes like that one that support the claims. I'm sure that the defendants will tell a different story very well, but it is hard to dismiss the allegations of this complaint offhand.

 

[Shazster]

Remember the good old days when an 'AI' had to achieve superhuman general-purpose capabilities and build an army of slaughterbots in order to rise up; rather than just being a glorified expert system and having eager accomplices?

Makes me wonder which is the more humane choice: Let the slaughter bot just cleanly and quickly put one right between my eyes or spend whatever is left of my existence being targeted to be nickel-ed and dim-ed into Dickensian homelessness and poverty by a gang of Private Equity assholes, who have decided they would prefer whatever "excess value" I find in my existence be transferred to their bank accounts because "Capitalism".

It gets harder avoiding bumping up against Ars' non-advocation of violence moderation policies by the day.

 

[crmarvin42]

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 that was what they were doing, then you might have the right of it, but the complaint alleges considerably more than pricing comparisons. They accuse the software of coordinating supply, not due to an organic change in supply, but due to the software scheduling lease terminations across all users of the software. That bit is one form of collusion. The fact that they are required to use the software's pricing recommendations at least 80% of the time is another form of collusion. The software is essentially pooling multiple apartment owners across an entire market and then setting pricing and availability at all of them simultaneously.

 

[gsgrego]

Ah landlords. Literally the hitlers of the business world. They literally kill people over their greed.

https://www.ranker.com/list/landlord-ho ... ob-shelton
https://www.buzzfeed.com/hannahdobro/la ... or-stories

 

[JPMeyer]

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.

 

[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.

 

[Derecho Imminent]

Essential housing as nothing but a commodity - read it and weep.

No seriously, we should all be weeping at how we deny people affordable accommodation just so a handful of people can make 10% more profit for that year. It's disgraceful and yet it's reality. Housing is a right, the "market" isn't serving the needs of people it's serving the needs of investors. So the only option left is for Government to step in, since housing is now unaffordable for most of the lower socio-economic class and increasingly so even for many in the middle socio-economic class. Supply & demand principles are meaningless when you manipulate the market to this extent.

Ive said for years that for us to have affordable housing for poor to middle class we need to have government build some appropriate housing and sell it directly to the ones that really need it with the caveat that they arent allowed to sell it off to house flippers. If they want to sell it then sell it back to the government so it can be sold to someone else that really needs it.

 

[graylshaped]

A.L.A.S.

All landlords are scum.

My mother-in-law might not disagree with you, since we have not replaced her clothes drier as she requested. On the other hand, when she travels, her landlord does stop by to make sure the cat is fed.

I’m sure you’re one of the good ones lol.

For real though, pointing out that profiting off the predatory and exploitative commodification of housing is a bad thing, and that most people who do so tend to be shitbags, is not a personal attack on you. If you have an adu or family property, there’s no bloody Maoist revolution coming for you, so relax.

But what the fuck bud, replace the dryer. If you rented it to her with a dryer, and now there’s no dryer, and you haven’t reduced her rent, that’s bad.

We're a two minute drive away, and our drier is available to her. I often carry her wet laundry into the house for drying.

The drier in her apartment works fine. It is just slow, and requests small loads. It is designed for the EU market, and Americans struggle with that. My daughter has survived for years with exactly the same model.

Internal venting limits ones options.

 

[andocom]

Advising to not fill vaccancies so as not to drag the market down strikes me as a little odd, almost a prisoners dilema situation.

Maybe its more likely because a decent percent of the market is filled by relatively few large players.

In a properly functioning market I find it hard to imagine an owner would withhold their property from the rental pool for a few months so there aren't more properties for rent at any time. That would be like avoiding competitive pricing by not offering your products for sale.

I wonder if it would also be the case in markets or times when supply outstrips demand that this software would have the exact opposite effect.

 

[Bernardo Verda]

[ [ [ quote-limit snip-age ] ] ]

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.

I've never heard of an analyst that requires management to justify why they are departing from the analyst's recommendation.

This implies a relationship is of a different nature than just advisory.

Would be interesting to know what happens if a company signs up for this service then repeatedly refuses to keep properties off the market when instructed, and refuses to not undercut the recommended prices.

We'll probably learn that during discovery.

Yes, it smacks very much of how the Phoebus Cartel colluded (and audited/enforced compliance) to control the light-bulb market -- back in the 1920's.

This is just a "but now we can do it on a computer" innovation.

 

[Firefool125]

It's pretty hilarious that what is probably the least problematic, though still immensely problematic, aspect of this entire situation is the only thing that one can sue over

 

[SpecTP]

I'm surprised the biggest home leasers Blackstone and InvitationHomes are not on that list of using that software.

 

[fenncruz]

It's not just the prices. The article mentions staggering lease renewals. I rented from greystar a few years ago and they initially gave me a 11 month lease, which seemed like an odd unit of time to pick (but where happy to renew). I assumed they wanted to avoid rental protections for longer term leases but after reading this they probebrly wanted to stagger the start/end dates to artificialy drive the supply/demand curve.

They are not doing that to affect supply/demand. IF thats what they wanted to do then they would just simply not list it. These uneven lease terms are to limit how long a unit is vacant. EG: they dont want the unit vacated in DEC because it will sit until spring. So they have the lease term end in March (or later) when more people are looking to move.

Which is wired then because I was the random person looking for a place durung the winter. A 11 month lease would have expired at the start of December.

 

[gg555]

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.

If there is enough competition that is literally the opposite of how markets work. People underprice their competitors to gain marketshare and customers. Only in markets that are not really competitive (of which there are many, but hardly all or "most") does it work the way you describe. So it is extremely inaccurate to say that is how it works "at the minimum" in "most industries."

The whole purpose of a cartel is to undermine normal market dynamics. If you don't know and can't predict what your competitor is going to do, your economic incentive is to undercut your competitor on price. But if everyone gets together in secret and agrees on the price and promises to stick to it, which is what a cartel does, then you can artificially inflate prices. Of course, it only takes one cheater to ruin the cartel and the incentive to cheat is high, because there is a very large potential economic benefit to undercutting the price of your competitors and doing a higher volume of sale.

So there is nothing wrong with looking around and seeing what price your competitors are charging to determine your own price. That does not lead to inflating prices. That leads to undercutting prices as much as possible to steal customers from your competitor. But what the app allegedly does is create a way to coordinate everyone raising their prices together, so they don't have to fear their competitors undercutting their prices, as they would under normal market conditions. And if the app in fact accomplishes that, then it is creating a cartel like system of pricing.

 

[gg555]

Interesting. When does a 'business idea' become an 'illegal racket'? Is this another sign of 'late stage capitalism'?

When someone’s idea or need to enrich themselves screws everyone else over in a major way. Yes, it’s LSC.

Not here to defend capitalism, but thats like, every idea to enrich ones self since the beginning of time. Early colonialism wasn't capitalism, neither were viking raids. Too broad a definition. Late stage capitalism isn't the first appearance of powerful people screwing everyone they can get their hands on for more power.

It's also worth noting that, although wealth inequity has become quite extreme lately, especially in the U.S., amongst developed nations, what we are experiencing now is nothing like the era of the robber barons in the 19th century and the Gilded Age. Rockefeller's net worth at one point made up 3% of U.S. GDP (far more than Elon Musk). Standard Oil was a true monopoly. At the same time, there was a huge increase in wealth in general in that period and many people saw significant increases in their wages, but the level of abject poverty was also staggering and nothing like what exists in the U.S. today. So, things have been a lot worse, and it wasn't the end of capitalism.

I mean, this is one of the basic arguments of Thomas Piketty's groundbreaking Capital in the Twenty-First Century. Extreme wealth inequality is the norm in capitalism--and also more generally throughout history. The expansion of the middle class and the reduction in extreme wealth that occurred in the mid 20th century appears to be the anomaly. That doesn't mean we shouldn't strive to repeat that experience. But we should be honest and realistic about what history actually looks like and that wealth inequality does not by some immutable law of history magically lead to the end of capitalism.

 

[corkii]

to QUALIFY for a STUDIO apartment (1700$ per month) in denver you need 60K a year of verifiable income.

That's $28 an hour and you don't even get a bedroom.
NO ocean views, no 80 degree year long weather...

EVERY year since 2020 you get an email that basically says pay more or MOVE.

I'm actually a landlord that rents 2 condos outta of state I used to live in I travel and like to be mobile.

I've NEVER raised rent as a renter of 20 years my rents NEVER been raised until 2020.
I only care their rent covers my bills, repairs, & I don't get complaints or have issues, not really into it for profit. If something breaks I tell them to buy or fix it and take that off next months rent...

At this point I'm pretty sure next year when the extortion email comes again I'm goin to have to kick a long term renter out and move into one of my old places, it;s getting pretty ridiculous & I have no money concerns.

Can't fathom how regular 40 hour workers can compete and why work 40 hours a week honestly & you cant even afford a 1 bedroom and a car, no wonder people are choosing tents.

If I was in my 20s I would'nt even bother. Working 3 weeks just for rent.

I make way over 60K why would I want to live in a studio apartment?

The new swanky building I do live in is basically an overpriced kennel at this point. I know Im an old man yelling at clouds but dogs werent apartment pets when I was coming up, owning a dog and not a yard qualifies as animal abuse in my eyes its 100+ dogs so barking 24/7 and for that privilege the last 2 years rent went up $200 a month each year $400 more than the original lease I signed...

The end goal is basically let the algo raise rent EVEY year till all the poor people get flushed out and is a building of 100+K earners/animal abusers it's not clever but apparently its legal.

 

[Systema Encephale]

This one is interesting. I did a business exercise a few years ago where we had to figure out if gas stations posting their prices on the signs should count as collusion since their competitors can look and then adjust prices, and if that helps them raise prices and unofficially fix them as a group. This software reminds me of the same thing in that it's just a shortcut to looking at a bunch of price sheets.

Oh boy, just wait until you hear that Gas Stations have been using this exact same kind of software for a looooooong time (PriceAdvantage/Kalibrate). No need to even look out the window or adjust the prices yourself!

Most stations don't have the freedom to adjust prices anyway. It's usually set by the suppliers, who quite obviously collude on it. But the stations themselves make very little on gas sales. It's all the other stuff that people come in and buy that makes them money.

Where I live (Sweden) there are many unmanned, automated gas stations - there is no shop, nothing else but fuel. Those stations would not make sense if the fuel was a loss leader. Even the "traditional" stations with a shop often require card payment directly at the pump, and most people who come to refuel will never enter the shop.

I guess the whole underlying business model is different - stations owned directly by the oil companies, less of a franchise?

 

[TroubleMan]

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?

You are missing the point. If multiple, competing competing companies all hired the same exact person as a pricing consultant, then that pricing consultant told them how to set their prices based on the private date provided to him by those companies, that is 100% illegal. It's called price fixing.

You're looking at it as if each company had their own price consultant, which made independent judgements on pricing for each company. That's not happening. It's all of the companies hiring "a guy named Bob," giving him private data, and setting their prices based on his knowledge of that private data.

 

[trisct]

The lawsuit will only have lasting effect if it shuts down the algorithm completely, erasing the business model for this company. A slap on the wrist and minor award that amounts to a small percentage of profits is not a remedy for this sort of camouflaged collusion. It needs to be crushed hard.

 

[jdietz]

They just gotta amend the algo to not use nonpublic data, or only use nonpublic data from the client. It could still help clients decide rents to charge.

 

[rosen380]

This one is interesting. I did a business exercise a few years ago where we had to figure out if gas stations posting their prices on the signs should count as collusion since their competitors can look and then adjust prices, and if that helps them raise prices and unofficially fix them as a group. This software reminds me of the same thing in that it's just a shortcut to looking at a bunch of price sheets.

Oh boy, just wait until you hear that Gas Stations have been using this exact same kind of software for a looooooong time (PriceAdvantage/Kalibrate). No need to even look out the window or adjust the prices yourself!

Most stations don't have the freedom to adjust prices anyway. It's usually set by the suppliers, who quite obviously collude on it. But the stations themselves make very little on gas sales. It's all the other stuff that people come in and buy that makes them money.

Where I live (Sweden) there are many unmanned, automated gas stations - there is no shop, nothing else but fuel. Those stations would not make sense if the fuel was a loss leader. Even the "traditional" stations with a shop often require card payment directly at the pump, and most people who come to refuel will never enter the shop.

I guess the whole underlying business model is different - stations owned directly by the oil companies, less of a franchise?

Per [1] gasoline is $1.97/L in Sweden and $1.08/L in the US. So, sure, if US gas prices were like 80% higher you might have a point (of course assuming the previous poster was talking about the US specifically).

But maybe most of that difference is gas taxes...? Per [2] Sweden is at € 0.64/L; that is $0.63USD, so $1.34/L with taxes excluded. In the US it varies by state, but using the average (per EIA) it is $0.50 per gallon.

With 3.79 liters per gallon, that is $0.13/L, which puts the US average pre-tax price at $0.95/L. Closer, but Sweden is still 41% higher.

So, yes, it seems that in Sweden they price gas to make it profitable to run a stand-alone gas station, while in the US, they price it largely just to get you in the door.

[1]https://www.globalpetrolprices.com/gasoline_prices/
[2]https://taxfoundation.org/gas-taxes-in-europe/

 

[ardent]

This seems similar to "On a computer" patents.

If the property owners/managers got in a room to share private data used for pricing, it would clearly be illegal, but since it's done on a computer owned by a third party it somehow becomes ok.

I mean, that's not really how the law works, but I can see that being the defense. It would theoretically open the companies up to racketeering conspiracy and wire fraud conspiracy, but you could try it.

 

[ardent]

I know Im an old man yelling at clouds but dogs werent apartment pets when I was coming up, owning a dog and not a yard qualifies as animal abuse in my eyes its 100+ dogs so barking 24/7

We had dogs in the apartment over 30 years ago, so it's not really a new trend. Granted it was a co-op so nobody could tell us not to, but... I do wonder at the people who leave their dog locked in the apartment 9+ hours a day, though.

Of course, there's a lot of loneliness and unfulfilled codependency in modern society, and dogs can certainly take the edge off that in a way cats don't. Still, the idea of leaving your bestie caged 9 hours a day doesn't sit right with me.

 

[Dumb Svengali]

Interesting. When does a 'business idea' become an 'illegal racket'? Is this another sign of 'late stage capitalism'?

When someone’s idea or need to enrich themselves screws everyone else over in a major way. Yes, it’s LSC.

Not here to defend capitalism, but thats like, every idea to enrich ones self since the beginning of time. Early colonialism wasn't capitalism, neither were viking raids. Too broad a definition. Late stage capitalism isn't the first appearance of powerful people screwing everyone they can get their hands on for more power.

Imagine how addicted to defending capitalism you’d have to be to argue that the East India Company wasn’t capitalism.

I know its very fashionable to concoct the worst possible version of someone’s point and then sneer at that, but the East India Company was precisely why I said EARLY colonialism. Can explain how the EIC, founded in 1600, is proof that the conquest of the Canary Islands by the Crown of Castile, 198 years earlier, is an example of capitalism?

I suggest you reread my comment without reflexive rage and realize I am saying capitalism causes harm, but greed pre-exists capitalism. That’s a point that Marx and Engels outlined early in the development of historical materialism. Unless you think that Marx and Engels were “addicted to defending capitalism”?

 

[watermeloncup]

This one is interesting. I did a business exercise a few years ago where we had to figure out if gas stations posting their prices on the signs should count as collusion since their competitors can look and then adjust prices, and if that helps them raise prices and unofficially fix them as a group. This software reminds me of the same thing in that it's just a shortcut to looking at a bunch of price sheets.

Oh boy, just wait until you hear that Gas Stations have been using this exact same kind of software for a looooooong time (PriceAdvantage/Kalibrate). No need to even look out the window or adjust the prices yourself!

Most stations don't have the freedom to adjust prices anyway. It's usually set by the suppliers, who quite obviously collude on it. But the stations themselves make very little on gas sales. It's all the other stuff that people come in and buy that makes them money.

Where I live (Sweden) there are many unmanned, automated gas stations - there is no shop, nothing else but fuel. Those stations would not make sense if the fuel was a loss leader. Even the "traditional" stations with a shop often require card payment directly at the pump, and most people who come to refuel will never enter the shop.

I guess the whole underlying business model is different - stations owned directly by the oil companies, less of a franchise?

Adding to what rosen380 said, in the US most gas stations are franchised. So they have an incentive to make money on side businesses given that the price of gas is mostly out of their hands and not profitable. Personally, I almost never go into the gas station stores except on long trips when I want snacks or to use the bathroom, but apparently it's a profitable enough business that many gas stations are expanding their store options, to the point where some actually have good food instead of hot dogs that have been on the rollers for 48 hours. Finally, cash payment is still pretty common in the US, which basically necessitates having a cashier on site anyway. Yes, they could use automatic cash acceptance machines, but those tend to be unreliable and would also be subject to theft and vandalism (bunch of degens in this country).

 

[crmarvin42]

This one is interesting. I did a business exercise a few years ago where we had to figure out if gas stations posting their prices on the signs should count as collusion since their competitors can look and then adjust prices, and if that helps them raise prices and unofficially fix them as a group. This software reminds me of the same thing in that it's just a shortcut to looking at a bunch of price sheets.

Oh boy, just wait until you hear that Gas Stations have been using this exact same kind of software for a looooooong time (PriceAdvantage/Kalibrate). No need to even look out the window or adjust the prices yourself!

Most stations don't have the freedom to adjust prices anyway. It's usually set by the suppliers, who quite obviously collude on it. But the stations themselves make very little on gas sales. It's all the other stuff that people come in and buy that makes them money.

Where I live (Sweden) there are many unmanned, automated gas stations - there is no shop, nothing else but fuel. Those stations would not make sense if the fuel was a loss leader. Even the "traditional" stations with a shop often require card payment directly at the pump, and most people who come to refuel will never enter the shop.

I guess the whole underlying business model is different - stations owned directly by the oil companies, less of a franchise?

Adding to what rosen380 said, in the US most gas stations are franchised. So they have an incentive to make money on side businesses given that the price of gas is mostly out of their hands and not profitable. Personally, I almost never go into the gas station stores except on long trips when I want snacks or to use the bathroom, but apparently it's a profitable enough business that many gas stations are expanding their store options, to the point where some actually have good food instead of hot dogs that have been on the rollers for 48 hours. Finally, cash payment is still pretty common in the US, which basically necessitates having a cashier on site anyway. Yes, they could use automatic cash acceptance machines, but those tend to be unreliable and would also be subject to theft and vandalism (bunch of degens in this country).

Growing up, our local gas station was visited more as a convenience store to pick up the occasional gallon of milk or loaf of bread, than for actual gasoline. In my teen years, it was visits for munchies or coffee on late night activities quite often, even before I was old enough to drive. Gas, otoh, was usually purchased wherever we were when we needed it, which was rarely at or near home.

Then I moved to NJ, where you can't pump your own gas, and as a result almost no-one ever gets out of the car. Here, convenience stores at gas stations are quite small in most cases (exception being along the major interstates where long distance travelers get out to stretch their legs and use the restroom). Large convenience stores still exist, they just are not so closely associated with gasoline sales.

 

[MyersVandalay]

Interesting. When does a 'business idea' become an 'illegal racket'? Is this another sign of 'late stage capitalism'?

When someone’s idea or need to enrich themselves screws everyone else over in a major way. Yes, it’s LSC.

Not here to defend capitalism, but thats like, every idea to enrich ones self since the beginning of time. Early colonialism wasn't capitalism, neither were viking raids. Too broad a definition. Late stage capitalism isn't the first appearance of powerful people screwing everyone they can get their hands on for more power.

Agreed, but effectively it's the universal problem in all systems and times. At the end of the day every system ever conceived of has suffered the same problem. Those with the power to adjust the system... tend to be the same people that are currently benefiting from it. Just as when it comes to raiding/pillaging. The side that wins the battles, gets more weapons, money, food, and gets in even better positions to win the next fights.



The implimentations of communism in the USSR and China. Once again the rulers generally lived much, much nicer lives than the peasents.


The long and short of it is, every system seems to be largely fall into the same problem... those with the power to adjust things, are never anywhere close to the level of the middle or lower classes in society. Be it in government or the economy etc...

 

[corkii]

Pretty sure the algo will NEVER lower the rent.

Once these parasites start they cant stop.

If everyone's rent doesn't increase the same percentage that has to be somekind of discrimination based on something, but there's no way all 250 residents can collude to find out if so.

Funny thing was to switch apartments you're required to go thru entire application process again to see if you're worthy but apparently to raise the rent no such process is required.

Hope the whole market crashes spectacularly so I can see next years email that says hey this year you're paying $400 less a month due to market conditions haha yeah right. I'm mostly likely gone next rent hike simply on principal, it's about $800 a month over priced as it is, and it's practically a brand new building less than 5 years old.

I will be leaving a nice concrete doo doo for the pipes, take a nice tour of all the floors with bleach dripping out a roller bag on the carpet... so all the extra rent they've extorted from me will result in a 5000$ or more plumbing & new carpet bill among other things. If you'r gonna raise rent $400 a month over 2 years after being here since the building open for no reason but you can as pre-pandemic they didn't have the audacity to raise it, but after during a pandemic just flip the switch cuz you can, as if pay more or move is an option when they own most of the other swanky buildings and all the other places are doing the same, you need to provide $400 more per month of value and I don't use any of their swanky "amenities"

I'm old school we don't get mad we get even, I respect someone that looks me in the eye and tries to extort me, not these office types who think they're clever.

 

[agpob]

Things are pretty ugly in my town. With borrowing rates being so low, a couple of large investment groups from Denver borrowed a shit ton of money and basically bought up everything up here. From what I've seen, rents are up over 40% in the last 18 months, and there's nothing anybody can do because it's the same people that own everything. I wonder if something like this software gave them the idea that they could walk into the market here and clean up or if they just had the business plan or creating a monopoly.

Any financial crisis has always given real estate corporations more product. This time around it is driven by the "subscription" mentality. That allows for 'forever' income from entire communities/developments rather than re-selling the properties. Property management corps are now building entire communities for rent only housing. Steady, increasingly rapid march to "Get 'em out by Friday"...

 

[whitetigersx]

Second reaction: Cartels only have power when there is a shortage.

This is wrong. Cartels exist to control supply regardless of whether or not that supply is constrained by any other force. Tighter supply just makes their job easier, as tight supply shifts power to producers in general.

So how does what you said relate to control?

 

[Adreaver]

Oh no.

Anyway...

Yes... rental property owners working together to crank up rent to an amount where people feel even more squeezed and/or live from paycheque to paycheque is such a non-problem that we should ignore.

Pretty sure it was "colluding landlords being sued, oh no, so sad for the poor landlords drying their tears with my rent".

 

[Adreaver]

This one is interesting. I did a business exercise a few years ago where we had to figure out if gas stations posting their prices on the signs should count as collusion since their competitors can look and then adjust prices, and if that helps them raise prices and unofficially fix them as a group. This software reminds me of the same thing in that it's just a shortcut to looking at a bunch of price sheets.

It's not the same at all. In the earlier article an expert was quoted suggesting that the algorithm could be replaced with a "guy named Bob" and the problem becomes more obvious.

In the gas station analogy, it would be equivalent to hiring a guy named Bob to set your prices, and Bob also works for your competitors in the area doing the same "service." That's pretty clearly collusion.

Yes and no, it depends what Bob is doing.

If Bob is simply using vacancy rates and reported monthly rents to calculate the optimal rent and vacancy rate to maximize revenue across a given slate of units, is it really collusion?

Ultimately what Bob is doing here is calculating the fair market rent based on aggregated information, and providing that information to landlords. Those landlords are then free to act on that information as they please. Any given landlord is free to defect and charge X% less (or more) if they choose. Which is the key, Bob does not actually set anybody's prices. He merely suggests, at any given moment, what the optimal price appears to be based on data.

EDIT: Reading further comments, I'm seeing the fundamental different now; in this situation "Bob" is acting on proprietary information rather than public information If these companies only aggregated public listing information I'd have a point, but by collating data that is otherwise private...including data that purchasers have no abilityto see...it definitely creates something closer to collusion-by-proxy.

Housing is not a perfectly elastic market where "any price the market will bear" is a reasonable thing to consider. Same as healthcare or food. Your choice isn't "Do I buy this iPhone at this ridiculously inflated price, or do I buy some other brand of phone that's cheaper, or perhaps a used iPhone at a significantly reduced price?". Your choice is "Do I rent this property at this ridiculously inflated price, or do I sleep in my car and hope I don't lose my job, because I won't be able to get another one without an address."