DOJ Launches Criminal Probe Into RealPage Amid Rent-Fixing Scandal

Key Takeaways:

– The DOJ opened a criminal probe into RealPage and several multifamily building operators for alleged price-fixing
– The investigation is focused on RealPage’s Yardi software and its role in facilitating price fixing
– The federal government has already involved itself in class-action lawsuits against RealPage
– The DOJ’s probe has been ongoing for two years and is now a criminal investigation
– President Biden has highlighted cracking down on antitrust violations as a priority
– RealPage has denied any wrongdoing and stated that their software is legally compliant

inman:

The DOJ opened its investigation into the property management software firm as well as several multifamily building operators who authorities believe collaborated in a “price-fixing combination.”

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The U.S. Department of Justice has reportedly opened a criminal probe into the property management software company RealPage and several unnamed multifamily building operators for allegedly participating in a large scale price-fixing scheme, according to a report.

Politico reported on Wednesday that the DOJ is looking into the possibility RealPage helped facilitate price fixing at some of the large rental properties whose owners use the software, citing four unnamed sources.

The move would be the latest escalation in the Federal Government’s campaign against RealPage, which was sparked by a report from ProPublica that first suggested RealPage may be responsible for helping push rent prices in the United States to previously unseen highs. That report sparked more than 30 class-action lawsuits from renters, as well as proposed federal legislation that would ban the algorithmic pricing of rents.

The federal government has already involved itself in the class-action lawsuits. It filed a brief in the  U.S. District Court for the Middle District of Tennessee last fall, saying the collective class-action lawsuits against RealPage should move forward and that multiple apartment operators setting rental prices with the same algorithm is illegal under antitrust law.

“Put simply, RealPage allegedly replaces independent competitive decision-making on prices, which often leads to lower prices for tenants, with a price-fixing combination that violates” antitrust law, the DOJ said in support of the renters’ case.

Specifically in the government’s sights is RealPage’s Yardi software, which is used by landlords to estimate supply and demand for their listings, helping them maximize asking rents. The government is reportedly concerned that the software is used by competing multifamily operators to exchange pricing data that they would not otherwise have access to.

The DOJ’s criminal probe has reportedly been underway for two years already, and began as a civil investigation run by the department’s antitrust lawyers, according to Politico. The DOJ’s lawyers have reportedly issued subpoenas on behalf of a federal grand jury in Washington D.C.

Cracking down on antitrust violations has become a cornerstone of the Biden administration’s domestic agenda, as outlined by President Biden during his recent State of the Union address.

“For millions of renters, we’re cracking down on big landlords who break antitrust laws by price-fixing and driving up rents,” Biden said during the March 7 speech.

The DOJ has not commented publicly on the probe. RealPage did not respond to a request for a statement from Inman pertaining to the reported criminal investigation, but denied wrongdoing in a statement to Politico. 

“RealPage’s revenue management software is purposely designed and built to be legally compliant, and we have a history of working constructively with the Department of Justice to show that,” company spokesperson Jennifer Bowcock said in a statement to the outlet. “In fact, in 2017 the DOJ analyzed extensive information about YieldStar and [Lease Rent Options] when it granted antitrust clearance for RealPage’s acquisition of LRO without objecting to the nature of our revenue management products.”

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Property Chomp's Take:

Have you heard about the latest scandal involving RealPage and several multifamily building operators? The U.S. Department of Justice has opened a criminal probe into the property management software company and these operators for allegedly participating in a large scale price-fixing scheme.

According to a report by Politico, the DOJ is investigating whether RealPage helped facilitate price fixing at large rental properties whose owners use the software. This investigation comes on the heels of a report from ProPublica that suggested RealPage may be responsible for pushing rent prices to unprecedented highs in the United States.

The government has already involved itself in the multiple class-action lawsuits filed against RealPage. It argued in support of the renters' case that the software replaces independent competitive decision-making on prices with a price-fixing combination that violates antitrust law.

Specifically, the DOJ is focusing on RealPage's Yardi software, which is used by landlords to estimate supply and demand for their listings and maximize asking rents. The concern is that competing multifamily operators may be using the software to exchange pricing data, leading to illegal price fixing.

The criminal probe has reportedly been ongoing for two years and began as a civil investigation by the DOJ's antitrust lawyers. The government is taking a strong stance against antitrust violations, as highlighted by President Biden in his recent State of the Union address.

RealPage has denied any wrongdoing, stating that their revenue management software is legally compliant. The company has a history of working with the DOJ and has emphasized that their products have received antitrust clearance in the past.

As the investigation unfolds, it raises questions about the role of technology in the real estate industry and the importance of fair competition in pricing. Stay tuned for further developments as the DOJ continues its probe into RealPage and the alleged price-fixing scheme.