Last Year’s Rent: RealPage Reaches Settlement Agreement with the Department of Justice in Algorithmic Pricing Case

One of the highly contested issues in antitrust in recent years contemplates in which circumstances, if any, the use of a pricing algorithm by competitors to set or influence pricing can violate the antitrust laws. We have written about this issue and the many cases brought in federal courts several times. The most noteworthy of those cases involved RealPage’s algorithmic tool, used to make or inform rental rates, which was brought by the Department of Justice Antitrust Division and several States.

Following a year-long federal antitrust lawsuit, which we wrote about here, and several months of property management companies reaching settlements over their use of RealPage, the DOJ has reached a settlement agreement with the AI-enabled software company, which provided commercial revenue management software and services for the conventional multifamily rental housing industry, announced days before Thanksgiving.

The detailed settlement agreement may provide guideposts as to what the Antitrust Division will and will not tolerate with respect to the use of these tools. Notably, the State plaintiffs so far have not settled the DOJ’s cases against certain landlords, and suits in other circuits brought by private plaintiffs remain unresolved.

The Proposed RealPage Settlement Agreement

On November 24, the DOJ filed a Proposed Final Judgment against RealPage, which does not have the precedential authority of a court’s opinion, but provides further insight into enforcers’ thinking as to where the “out of bounds” lines are.

Among the Final Judgment limits are features RealPage may include in its revenue management products, including models that determine geographic effects narrower than at a state level and features that limit price decreases or align pricing between competing users of the software. The Final Judgment would prohibit making identical pricing recommendations to different owners within the same market, but would not preclude making recommendations that are, directionally, similar to those provided to competitors. RealPage is also prohibited from disclosing non-public data belonging to individual property owners of multiple properties in revenue management products or otherwise for the purpose of recommending floor plan pricing, unit level pricing, or occupancy levels. 

The Final Judgment does not prohibit RealPage from discussing its products’ functionality or software-related technical issues or having private discussions with individual licensees or users of RealPage revenue management products about setting rental prices and software settings if those discussions are based solely on public data or that licensee’s or user’s own non-public data. However, RealPage revenue management software meetings to discuss or facilitate discussions about market analysis or trends based on non-public data or pricing strategies are expressly forbidden.

Additionally, the Final Judgement requires the appointment of a Monitor, to remain in place for three years after final approval, with sweeping oversight authority over the company’s operations, a written antitrust compliance policy to ensure conformance with the Final Judgment, that RealPage become a Government Cooperator in the DOJ’s case against other landlords, and that, with notice, RealPage open its doors and books for inspection by the DOJ.

Information Sharing Prohibitions

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 Final Judgment. The DOJ 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 could be reasonably used to determine current or future rental supply, demand, or pricing at a property, relates to the property owner’s or manager’s use of settings or user-specified parameters within revenue management products, or relates to the property owner’s or manager’s rental pricing amount, formula, or strategy. 

Among the prohibitions on data use and information sharing are allowing the software to use competitors’ non-public, competitively sensitive information to determine rental prices in runtime operation and the use of active lease data for purposes of training the models underlying the software, limiting model training to historic or backward-looking non-public data that has been aged for at least 12 months. RealPage is also prohibited from conducting market surveys to collect competitively sensitive information.

Following announcement of the proposed settlement, the Assistant Attorney General of the Justice Department’s Antitrust Division stated that “competing companies must make independent pricing decisions, and with the rise of algorithmic and artificial intelligence tools, we will remain at the forefront of vigorous antitrust enforcement,” underscoring that algorithmic price-fixing will remain an area heavily scrutinized by regulators and enforcers for the foreseeable future. In an unusual step, the head of the Antitrust Division also posted a video on X regarding the settlement.

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

A consent decree is not a judicial precedent. Nor is it technically a safe harbor as were the information sharing guidelines that were in effect for nearly 30 years, but were withdrawn during the Biden Administration. At the very least however, parties who offer or parties who use such third party tools will likely model their behavior to conform to the contours of this settlement.

The claims settled here remain at issue in consolidated civil suits brought by individual tenants and litigated in the U.S. District Court in Nashville. Landlord defendants have settled (subject to final approval), but RealPage has not. 

Mintz continues to monitor this very important area closely and will continue to report important developments. 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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