No Day But Today: Greystar Reaches Settlement Agreement with the Department of Justice in Realpage Algorithmic Pricing Case

Last August, we wrote about the Justice Department’s lawsuit against software developer RealPage, which alleged that the property management software company enabled rent collusion, through its revenue management product, in violation of Sections 1 and 2 of the Sherman Antitrust Act. In January, the DOJ amended its complaint to include six multifamily apartment owners and managers and allegations that, in addition to their common use of RealPage, these landlords exchanged competitively sensitive information with one another through other means. RealPage’s activities have additionally faced private litigation and actions from local enforcers in D.C. and Arizona.

The Proposed Greystar Consent Decree

Last week, the DOJ filed a Proposed Final Judgment against one of the landlords: Greystar Management Services, LLC – the largest landlord in the United States, according to the DOJ’s press release. Although the Proposed Final Judgment does not have the precedential authority of a court’s opinion, it is instructive in providing insight into enforcers’ thinking as to where the “out of bounds” lines are.

The terms of the Final Judgment are operative for five years after its entry, unless it is extended by the court or otherwise terminated at least two years after its entry, if the DOJ deems that the Final Judgment is no longer necessary or in the public interest.

Among the Final Judgment limits are the license or use of any revenue management product that uses non-public data to set rents. Greystar is additionally prohibited from using any revenue management product that incorporates a rental price floor or a limit on rental price recommendation decreases or otherwise requires Greystar to accept recommended rental prices or range of prices. Greystar will be required to certify to the DOJ that whichever product it decides to use complies with the non-public data requirements. In the event Greystar cannot certify that the revenue management product it uses complies with the Final Judgment, a Monitor with sweeping oversight authority over the company’s operations to ensure compliance with the Final Judgment will be appointed.

Importantly, the Final Judgment does not prohibit Greystar’s use of algorithmic pricing but rather sets conditions Greystar must meet and certify prior to that use – in some cases. For example, if Greystar uses a RealPage revenue management product after the court enters a final judgement in the RealPage case, no certification is required. If Greystar uses a revenue management product from a vendor other than RealPage, after a final judgment in the RealPage case is filed but before entry by the court, Greystar must secure and submit a certification from the vendor of the revenue management product that the product complies with the non-public data and rent recommendation restrictions and limitations sent forth above. The same applies if Greystar decides to use a RealPage revenue management product at any Greystar Property in the absence of a RealPage final judgment.

Information Sharing Prohibitions

The Final Judgment also contains restrictions on information sharing. The antitrust limitation on information sharing, even without an agreement, has been an important antitrust issue for nearly 50 years. Most antitrust learning taught that historical data and aggregated or otherwise non-identifiable data did not raise an antitrust risk. With the rise of algorithmic pricing and artificial intelligence, the antitrust enforcers’ views have also evolved. This evolution is reflected in the relevant provisions of the consent decree. Here, the DOJ has broadly defined competitively sensitive information to include “property-specific data or information (whether past, present, or prospective) which, individually or when aggregated with such data or information from other properties:

(1) could be reasonably used to determine current or future rental supply, demand, or pricing at a property or of any property’s units . . .;

(2) relates to the Property Owner’s or Property Manager’s use of settings or user-specified parameters within Revenue Management Products with respect to such property or properties; or 

(3) relates to the Property Owner’s or Property Manager’s rental pricing amount, formula, or strategy . . .”

Greystar is additionally prohibited from agreeing, expressly or tacitly, with another landlord on which revenue management product to use; disclosing non-public data to or soliciting non-public data from another landlord; or using non-public data Greystar receives from another landlord. Greystar is also prohibited from attending or participating in RealPage meetings, a forum the DOJ alleged was the breeding ground for the underlying allegations. 

The Final Judgment further requires an antitrust compliance plan and officer, that Greystar become a Government Cooperator in the DOJ’s case against RealPage and other landlords, and, upon reasonable notice, that Greystar open its doors and books for inspection by the DOJ. Of course, in a settlement such as this, conduct remedies may go beyond what a court may impose at trial, prohibiting specific prior unlawful acts as well as other conduct that may result in recurrence of the violation. These measures are often referred to as "fencing in" provisions.

Following the announcement of the settlement, the Assistant Attorney General for the Antitrust Division cautioned that “as these systems become more prevalent across our economy, we anticipate that the number of investigations involving these shared algorithms will grow. To avoid exposure, firms should perform their own due diligence on shared algorithms' inputs and functionality to prevent collusion that can harm consumers." Clearly, algorithmic price-fixing, a major focus of the Biden administration, will remain an area heavily scrutinized by regulators and enforcers for the foreseeable future.

Mintz continues to monitor this case as well as developments in legislation related to algorithmic pricing and the agencies’ posture toward algorithmic pricing activity. If you have any questions regarding this case or antitrust enforcement in general, please contact one of the individuals above or your regular Mintz attorney.

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