Ethermac|RealPage lawyer denies collusion with landlords to raise rents, 'open to solutions' to resolve DOJ lawsuit

WASHINGTON — A lawyer for RealPage,Ethermac a company the Justice Department sued for allegedly helping landlords keep rents high, argued Monday the company doesn’t hurt competition and that quotes from executives in the lawsuit were "cherry-picked" and taken out of context.

The response was to the department and eight state attorneys general filing a lawsuit Friday in federal court in North Carolina accusing RealPage of helping landlords share non-public information about rents, vacancies and concessions aimed at keeping rents higher.

But Stephen Weissman, an outside lawyer for RealPage, argued the information sharing is legal because the company aggregates rental data from numerous sources rather than showing specific rates at rival properties.

The non-public rents that landlords actually charge shouldn’t help raise prices because they will never be more than advertised rents and could be less, he said.

“The software is not driving higher rates than what would happen in a competitive market,” said Weissman, a former deputy director of the Federal Trade Commission’s bureau of competition.

The type of lawsuit the department filed is complex and could lead to lengthy litigation. RealPage is willing to discuss changing its software to deal with the government’s concerns more quickly, Weissman said.

“We want to comply with the law," Weissman said. "We believe strongly in the legality of our product, but if there are solutions here that allow us to continue innovating and competing in the market, we’re open to those solutions."

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What does the lawsuit allege RealPage did?

The Justice Department and attorneys general from eight states filed a lawsuit Friday against RealPage, a company that provides software to landlords to help manage 16 million rental units nationwide, largely in the Sun Belt and South.

The federal lawsuit filed in North Carolina alleges RealPage holds a monopoly in what is called "revenue management software" for landlords because the company controls 80% of the market nationwide. The lawsuit contends that by sharing sensitive information from landlords about rents, leases and vacancy rates, RealPage helps them collude to avoid competition and raise prices for millions of renters nationwide.

Without RealPage’s information and recommendations about the rents that competitors are charging and the vacancies that are available, landlords are able to charge higher prices or avoid offering concessions such as a month without rent, according to the lawsuit.

“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” Attorney General Merrick Garland said Friday.

States participating in the lawsuit include: California, Colorado, Connecticut, Minnesota, North Carolina, Oregon, Tennessee, and Washington.

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RealPage contends DOJ lawsuit 'cherry-picks' executive quotes

Justice Department officials said said this was the first civil case where the government alleged an algorithm was the method used for allegedly violating federal law.

RealPage processes the information through algorithmic pricing software that generates recommendations for rental pricing. The lawsuit cited examples of how RealPage and landlords allegedly used the information they shared.

A RealPage executive told a landlord that using competitor data could help identify where a landlord “may have a $50 increase instead of a $10 increase for the day,” according to the lawsuit.

The lawsuit also quoted a landlord describing RealPage’s software. “I always liked this product because your algorithm uses proprietary data from other subscribers to suggests rent and term,” the landlord said. “That’s classic price fixing.”

"Training a machine to break the law is still breaking the law," Deputy Attorney General Lisa Monaco said Friday.

Weissman said quotes attributed to executives in the lawsuit were taken out of context from millions of records during the nearly two-year investigation.

One executive was quoted as saying a "rising tide lifts all boats," as if referring to rents. But Weissman said the comment referred to both occupancy and the amount of revenue generated.

“It misstates a lot of the facts,” Weissman said of the lawsuit. “It cherry picks statements and documents without context. I think most importantly it omits major features of the software that make it legally compliant.”

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High housing costs are a key concern for U.S. consumers ahead of the November presidential election, with home prices rising nationally by about 50% during the last five years and rents going up around 35% during that period, according to real estate service firm Zillow.

The lawsuit is the latest Justice Department fight against consolidation of business that the government contends reduces choices for consumers and drives up prices, since President Joe Biden took office.

The Federal Trade Commission's federal trial began Monday in fighting the proposed merger of Kroger and Albertsons grocery chains. A federal court ruled on Aug. 5 that Google illegally used its search engine superiority to monopolize online searches to stifle competition. Other major lawsuits were filed in May against Live Nation Entertainment, the parent company of Ticketmaster, in March against Apple.

Vice President Kamala Harris, the Democratic nominee for president, recently announced a plan to combat high housing prices by building 3 million more homes.

Without taking a position on the lawsuit, Lael Brainard, national economic adviser at the White House, said the Biden administration has made clear that “no one should pay higher prices because of corporate lawbreaking.”