New Technologies to Get Around Old Laws: Algorithms Being Used to Evade Antitrust Rules, Fix Prices and Worse

Conor here: I mistakenly referred to algorithms being used by companies in this piece as AI. Thank you to readers for pointing out my error. The necessary corrections have been made. 


The legal woes keep piling up for the Texas-based tech company RealPage, which is accused of using algorithmic software to enable landlords across the country to collude to inflate rents. The landmark cases will likely decide whether algorithms (and eventually AI) can be used to circumvent antitrust laws and evade other regulations.

The Washington, DC, attorney general, Brian Schwalb, recently became the first to sue RealPage (along with 14 of DC’s biggest landlords) for using the same algorithm program to set prices. More than 90 percent of large apartment buildings in the DC metro area (more than 50 units) use the RealPage software, according to the DC attorney general’s office. The suit accuses them of illegally colluding to set rent prices above competitive levels.

On Nov. 15, the US Department of Justice stepped into a separate massive antitrust lawsuit, backing tenants who are suing RealPage and apartment rental giants from around the country.

RealPage is accused of acting as an information-sharing middleman for real estate rental giants. The company is facing several lawsuits contending that the property managers agreed to set prices through RealPage’s software, which also allowed the companies to share data on vacancy rates and prices in many of the US’ most expensive markets.

The lawsuits against RealPage and the rental management companies contend that RealPage’s software covers at least 16 million units across the US, and private equity-owned property management companies are the most enthusiastic adopters of the RealPage technology. RealPage itself is a private equity-owned venture. Many of the rental markets dominated by large landlords have seen astronomical growth in rental prices in recent years (even before the pandemic), as well as a rising number of evictions and spikes in homelessness.

Reporting, the lawsuits, and RealPage’s own statements showed that the company’s software said that it was often more profitable for mega landlords to have higher vacancy rates and keep rents elevated, which contradicted the old landlord practice of getting heads in beds even if that meant lowering rents.

The following are some of the real estate goliaths named in the lawsuits who were using RealPage software to allegedly collude and keep rents artificially high:

  • Greystar: The nation’s largest property management firm with nearly 794,000 multifamily units and student beds under management. In December, it was nominated for six( count ‘em, six!) 2022 Private Equity Real Estate Awards. Roughly 100,000 student beds under management.
  • Trammell Crow Company, headquartered in Dallas, is a subsidiary of CBRE Group, the world’s largest commercial real estate services and investment firm.
  • Lincoln Property Co. Manages or leases over 403 million square feet across the US.
  • FPI Management. Currently manages just over 155,000 units in 18 states.
  • Avenue5 manages $22 billion in multifamily and single-family assets nationwide.
  • Equity Residential, the 5th largest owner of apartments in the United States, primarily in Southern California, San Francisco, Washington, D.C., New York City, Boston, Seattle, Denver, Atlanta, Dallas/Ft. Worth, and Austin.
  • Mid-America Apartment Communities, which as of June 30, 2022, owns or has ownership interest in 101,229 homes in 16 states throughout the Southeast, Southwest, and Mid-Atlantic regions.
  • Essex Property Trust (62,000 units). This fully integrated real estate investment trust (REIT) acquires, develops, redevelops, and manages multifamily apartment communities located in supply-constrained markets on the west coast.
  • Thrive Community Management (18,700 units in Washington and Oregon).
  • AvalonBay Communities, Inc. As of September 30, 2022, the Company owned or held a direct or indirect ownership interest in 293 apartment communities containing 88,405 apartment homes in 12 states and DC.
  • Cushman & Wakefield, with a portfolio of 172,000 units.
  • Security Properties portfolio reflects interests in 113 assets encompassing nearly 22,354 multifamily housing units.
  • Cardinal Group Holdings, LLC. 89,000 units managed with more than 100,000 beds and a heavy presence in student housing.
  • CA Ventures Global Services LLC. Manages more than 60,000 beds in 69 university markets.
  • DP Preiss Co. Specializes in student housing and has more than 30,000 beds in 12 states.

The lawsuits against RealPage and these landlords, consolidated in federal court in Nashville, Tennessee, are being watched closely as it will have far-reaching consequences across nearly every industry where algorithmic price-setting technologies are proliferating.

RealPage and the landlords are currently attempting to have the lawsuits dismissed based on two arguments:

  1. The defendants claim that the complaints must be dismissed because RealPage recommends, rather than mandates, certain prices.

The DOJ weighed in with the following response on Nov. 15:

The complaints allege that RealPage exerts pressure to enforce its recommendations and landlords have outsourced pricing decisions to RealPage. Additionally even sharing the info is unlawful: In each of these cases, the challenged price-fixing scheme disrupted the competitive process. It is not necessary for liability that the scheme succeed in raising prices… So long as the evidence shows a mutual understanding among the competing landlords to use RealPage’s prices as a starting point, the scheme is per se unlawful.

The second argument from RealPage and the mega landlords:

  1. The defendants also argue that their conduct is not price fixing and hence the per se rule cannot apply because “[c]ourts have little to no experience evaluating whether use of revenue management software is unlawful…”

The DOJ’s response: a defendant cannot “shield it[self] from the consequences” of organizing a price-fixing cartel merely because it organizes the cartel through disseminating a software program. Judicial experience is relevant only in determining whether to adopt “a new per se rule”— not in deciding whether to apply an established per se rule.

The DOJ’s argument is essentially that price-fixing law applies even if an algorithm (or AI) told you to do it. Should that be confirmed by the court, it would have an enormous impact across the country.

“Algorithms are the new frontier,” the DOJ said in their filing. “And, given the amount of information an algorithm can access and digest, this new frontier poses an even greater anti-competitive threat than the last.”

And revelations are now coming out in waves that show nearly every corner of the economy using algorithms to fix prices – or worse.

UnitedHealth is now facing lawsuits due to its scheme to use algorithms to cut off care for the elderly and disabled. NaviHealth, which is owned by UnitedHealth, is also used by Humana, the company with the second-highest number of private Medicare enrollees behind UnitedHealth.

Such practices aren’t unfortunately new. Reporting by STAT’s Casey Ross and Bob Herman showed that:

Internal documents show that a UnitedHealth subsidiary called NaviHealth set a target for 2023 to keep rehab stays of patients in private Medicare plans within 1% of the days projected by the algorithm. Former employees said missing the target for patients under their watch meant exposing themselves to discipline, including possible termination, regardless of whether the additional days were justified under Medicare coverage rules….

The stringent performance goal was part of a broader effort to reduce expensive nursing home care for frail patients with privatized Medicare plans, the internal documents show. The strategy was conceived and executed by former top Medicare officials whose policies became a blueprint for UnitedHealth to reap hundreds of millions of dollars annually by shredding the government’s safety net with payment denials backed by an algorithm.

(NaviHealth is also used by Humana, the company with the second most private Medicare enrollees behind UnitedHealth.)

Using algorithms instead of humans to make the decisions to deny care is presumably faster and more effective from the insurers’ perspective as UnitedHealth Group’s profits soared, according to STAT. The story also quotes a former UnitedHealth employee who says she was fired for approving coverage for care she felt was justified but that went against the algorithm.

RealPage had a similar system for humans that dared to contradict its computer models. From ProPublica:

An update to the software tracked not only clients’ acceptance rate, but also the identity of the landlords’ staff members who had requested a deviation from RealPage’s price, the lawsuit said. Compensation for some property management personnel was even tied to compliance with the company’s recommendations, it said.

Elsewhere in the world of algorithmic price fixing, the DOJ filed an antitrust lawsuit against Agri Stats Inc. in September for running anticompetitive information exchanges among broiler chicken, pork and turkey processors. Agri Stats allegedly collects, integrates and distributes price, cost and output information among competing meat processors, which allows them to coordinate output and prices in order to maximize profits. That, in turn, means grocery stores and consumers pay much more.

And there’s always Amazon:

Algorithmic collusion is relatively new – or at least understanding and identifying it is relatively new. It remains an open question as to how much the widespread implementation of algorithm middle men  could be contributing to higher prices for everything, but as the Kansas City Fed noted back in January, “Markups could account for more than half of 2021 inflation.” Principal Deputy Attorney General Doha Mekki admitted as much early this year at an antitrust conference in Miami:

An overly formalistic approach to information exchange risks permitting – or even endorsing – frameworks that may lead to higher prices, suppressed wages, or stifled innovation. A softening of competition through tacit coordination, facilitated by information sharing, distorts free market competition in the process.

Notwithstanding the serious risks that are associated with unlawful information exchanges, some of the Division’s older guidance documents set out so-called “safety zones” for information exchanges – i.e. circumstances under which the Division would exercise its prosecutorial discretion not to challenge companies that exchanged competitively-sensitive information. The safety zones were written at a time when information was shared in manila envelopes and through fax machines. Today, data is shared, analyzed, and used in ways that would be unrecognizable decades ago. We must account for these changes as we consider how best to enforce the antitrust laws.

A 2021 Yale study found that prices can rise above competitive levels when between two and seven competitors in a field use algorithmic pricing. So now comes the task of enshrining its illegality (and enforcing it), which shouldn’t be that complicated according to the SMU Science and Technology Law Review. Researchers there wrote earlier this year that while the use of algorithm middle men might be new, the antitrust laws that govern this type of behavior have been around for more than 140 years. And while algorithms might increase the speed of price-fixing based on up-to-the-second data, they’re otherwise nothing new:

Let’s just change the terms of the hypothetical slightly to understand why. Everywhere the word “algorithm” appears, please just insert the words “a guy named Bob.” Is it ok for a guy named Bob to collect confidential price strategy information from all the participants in a market, and then tell everybody how they should price? If it isn’t ok for a guy named Bob to do it, then it probably isn’t ok for an algorithm to do it either.

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  1. The Rev Kev

    ‘The Washington, DC, attorney general, Brian Schwalb, recently became the first to sue RealPage (along with 14 of DC’s biggest landlords) for using the same algorithm program to set prices. More than 90 percent of large apartment buildings in the DC metro area (more than 50 units) use the RealPage software, according to the DC attorney general’s office. The suit accuses them of illegally colluding to set rent prices above competitive levels.’

    Could it be that too many staffers for DC politicians, lobbyists, departments, agencies, etc. were being hit up too bad by these price rises hence they managed to goose the Washington DC Attorney General into suing RealPage on their behalf? Maybe it would have been smarter for RealPage not to go after people living in the DC area but to give it a bit of a miss.

    1. JR

      RealPage’s AI will now read your comment and will consider altering its pricing in DC apartment rental markets!

    2. Mark Gisleson

      My thoughts exactly. In the future AI will recognize some zip codes as being exempt from bonus rents.

    3. Carolinian

      They can always ditch their government jobs and go to work for lobbyists or defense contractors. Problem solved.

      Apparently Congress has just passed a kind of cost of living supplement as a stealth increase to their already generous (by historical standards) salaries. For the ten percenters the answer to inflation is ‘moar money for us.’

      As for the above, thanks. I’ve mentioned the huge real estate boom taking place where I live. In part this no doubt has to do with our serving as a bedroom community for a booming nearby city (BMW and other manufacturing) but you have to believe the almost frenzied pace of construction is also driven by out of state investors who, per above, may know that they can rig the system to make sure these large costs are profitable. Doing so in a laissez faire Republican state is doubtless the icing on the cake. No rent control here.

      Of course for years prior almost no apartment complexes were being built and some old public housing was being torn down. In the first Gilded Age people like Rockefeller and Morgan justified themselves as bringing order to markets by guaranteeing supply while taking their own oh so generous cuts. Now we have the plutocrats but not the order going by 2008 and what followed. Reform is desperately needed but Biden is no Roosevelt, despite these gestures.

  2. eg

    I dispute that any of this is AI, but it is clearly collusion and ought to be ruthlessly obliterated with every legal and regulatory tool available.

    1. R.S.

      I tend to concur. It’s not clear if those number crunchers fit the definition even of a weak AI. Anyway, all the buzztalk just obscures the reality. They may run a bleeding-edge AI cluster, an old Excel spreadsheet, or employ a gaggle of astrologers, it can (and IMHO should) be blackboxed.

  3. mrsyk

    private equity-owned property management companies are the most enthusiastic adopters of the RealPage technology. Color me unsurprised.

  4. ciroc

    Maybe I’m too much of a techno-optimist, but if AI can recognize the picture it’s painting, can’t it also recognize the price it’s manipulating and offer a fair price?

    1. TomDority

      AI does not recognize the picture it is painting – it is painting the picture it was told to paint – so if it is breaking a law, it is told to find a way around the law so as to appear to comply with the law via a different law path that may have contortions or definitions that allow the same end state.
      Sort of like a mouse nibbling at the edges of a cracker until the nibbles become the precedent to the consumption of the cracker. Cracker = law

  5. John

    The new excuse. “It wasn’t me. It’s that pesky AI.” Is any of this a surprise? AI is an opportunity to be lazy and to cheat and while it is artificial, it certainly is not intelligent … more of a digital parrot that can mix and match that which it has heard.

    1. R.S.

      I’m old enough to remember all those stories about “computers”. The computer charged someone with an umpteen million bill, the computer transferred someone’s funds to Seychelles, and so on. It was always Da Computah, not me, sir!

    2. Mikel

      It was always the point: To put enshittification and the bezzle on autopilot. And slowly chip away at any evidence and disappear knowledge that anything was ever and could be different.

  6. dirke

    First, this has nothing to do with AI.
    Second, software to manipulate prices has been in use since the early 1980s.
    Everything, from stocks, commodities, wages, futures, rent all were in use then.
    By the way this type of programming is not very difficult. I wrote on for a stock trader, to run
    on a PC when stock ticker feeds became available.
    Welcome to Corporatism, if want the cause of all this, blame Ronald Reagan. He signed all the
    legislation gutting controls and enforcement on corporations.
    Anyway, at some point I need to write article titled “What AI is and what is not” or maybe “AI for the impatient”

  7. hunkerdown

    So you’re going to just tendentiously call every algorithm in contact with human values “AI” now? Conor, with due respect, your takes have here have been consistently disinformed, PMC-embubbled, and reeking of mainstream narrative perfume, and this clickbait shit does neither NC nor me any favors. I’ll donate when you’re gone.

    1. Conor Gallagher Post author

      hunkerdown, appreciate you pointing out my error in describing the technology being used in this piece as AI. I mistakenly interpreted the RealPage tech. Not my best moment. “consistently disinformed, PMC-embubbled, and reeking of mainstream narrative perfume” seems a bit much, but thanks for the feedback.

      1. Ahinsa

        Conor both you and Nick have brought a very different perspective to NC and we value your well researched articles very much. People who do not appreciate your scholarship are welcome to find other avenues to satisfy their curiosity

        1. Michaelmas

          @ Conor —

          I concur with Ahinsac regarding the work you’ve generally done, which has shown an ability to dig and make connections in the geopolitical and socio-financial spheres that I admire and appreciate. It’s a big asset to NC and I almost always start one of your pieces anticipating I’ll learn something I hadn’t known before

          But, yeah, the RealPage algorithms don’t really rise to the levels of being AI.

          That’s partly a problem with society — the definition of what constitutes AI has been a moving target for decades, and now the hype and, also, uncertainty about what these new systems may be capable of is overwhelming — but it’s also a problem for anybody who sets out to think and write about them. If you are going to write about AI, you need to do some work to understand them better.

          Because there is a there there. For instance, LLMs are having a transformative effect in the biosciences —

          Comparative Performance Evaluation of Large Language Models for Extracting Molecular Interactions and Pathway Knowledge

          In material sciences —
          Google DeepMind researchers use AI tool to find 2mn new materials

          And here’s a more general overview —
          Science In the Age of Large Language Models

          This is all aside from whatever socio-economic effects AI may have on global labor markets.

          If you’re going to have a position pro or con AI, you really do need to be able to define what AI is to some extent in the first place.

    2. Acacia

      This seems a bit harsh.

      I didn’t see the original version of the article, but I think a certain amount of terminological imprecision must be allowed these days. Taking the long view, “AI” is once again in the news (for some interesting reasons that go beyond technology, I think), a cycle that has repeated itself over a period of some years now, while a lot of what is being discussed now isn’t actually “AI”. It hasn’t been and it still isn’t. But “AI” has become a kind of code phrase for the technology behind the algorithmic society that we’re entering into. It’s the social practices of that society that are most worrisome, I think, and some of these practices concerning rents are what Conor’s article is addressing, I take it.

      Strictly speaking, “AI” is not intelligence as we commonly understand it — the technology will fail at many very elementary tasks –, but just an evolving family of very sophisticated algorithms. There has been a debate about so-called AGI, and most people who understand this know know that the current generation of “AI” is very very far from AGI. Given the extremely slow progress of work on “AI”, there are credible arguments that it’s like not going to happen for some decades at least, as the technology is just far too primitive and knowledge cannot really be disembodied from all the senses, or perhaps it will become like nuclear fusion, something that just never gets realized because the problems are simply too insurmountable. I find myself now putting “AI” in scare quotes to draw attention to this.

      Again, I would offer that the important point concerns the social practices, not the exact terminology for the tech.

  8. Rubicon

    A relatively new interview with Dr. Michael Hudson had as its title “The US Is A Failed State.” Or “A Failed State…Nation.”

    You can not expect a large segment of a society to survive and grow when you have the immense profits and power of these American Aristocrats. As it stands right now, the Middle Class are being shredded. Next comes the relatively wealthy, but will even those folks be able to withstand the onslought?

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