Editor’s Note: The Federal Bureau of Investigation (FBI) has intensified its focus on the multifamily rental sector, specifically targeting RealPage’s price-setting software. This software has been at the center of controversy, accused of facilitating rental price inflation and potential collusion. The recent FBI raid on Cortland’s Atlanta headquarters, a significant player in the rental market, signals a serious federal crackdown on anti-competitive practices, aligning with the Biden administration’s priority to protect lower-income renters from exploitative pricing.

This heightened scrutiny is a pivotal moment for professionals in cybersecurity, information governance, and eDiscovery. The unfolding events highlight the intersection of technology and regulation, raising critical questions about the ethical use of algorithms in market settings. The implications for compliance and the legal landscape are profound, demanding close attention and proactive measures from industry stakeholders to navigate these challenges effectively.

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Industry News – Antitrust Beat

FBI Ramps Up Antitrust Investigation into Housing Market, Focusing on RealPage Algorithm

ComplexDiscovery Staff

The Federal Bureau of Investigation (FBI) has recently intensified its antitrust investigation into the multifamily rental industry, with a particular focus on the price-setting software developed by tech company RealPage. This heightened scrutiny comes in the wake of increasing lawsuits and government probes sparked by a ProPublica investigative report, which raised concerns about rental price inflation and potential collusion facilitated by RealPage’s algorithmic software.

In a significant development, FBI agents recently raided the Atlanta headquarters of Cortland, a major player in the multifamily rental sector with a portfolio of 80,000 units and offices in cities including Charlotte, Dallas, and Denver. This action underscores the growing concerns about anti-competitive practices in the housing market. Vic Hartman, a former FBI agent and white-collar crime expert, noted that such a raid typically indicates a federal judge has found probable cause of criminal activity.

The Biden administration has made it clear that addressing antitrust violations, particularly those affecting lower-income renters, is a priority. President Joe Biden himself highlighted efforts to tackle price-fixing and rental inflation in his State of the Union address, specifically mentioning corporate landlords. This federal crackdown aligns with multiple civil lawsuits filed by tenants and attorneys general in various districts, including Washington D.C. and Arizona, accusing RealPage and associated property management firms of conspiring to artificially inflate rental prices through data-driven price-setting software.

Rebecca Haw Allensworth, a law professor at Vanderbilt University, views the Biden administration’s approach as indicative of a serious commitment to antitrust enforcement aimed at protecting vulnerable populations. She sees this as characteristic of the current administration’s tougher stance against big business and tech companies.

At the heart of the controversy is RealPage’s revenue management software, which compiles pricing and occupancy data to help landlords set rates. A ProPublica analysis accused the software of enabling landlords to bypass competitive pricing, resulting in inflated rents. RealPage, through its attorney Stephen Weissman from Gibson Dunn, has defended its software, arguing that the scrutiny is politically motivated and that the real issue lies in the country’s housing shortage.

The impact of this software has been particularly noticeable in urban centers grappling with high rents. In Jersey City, New Jersey, the City Council has formally backed legislation to ban rent-setting algorithms, driven by advocacy from the local union 32BJ SEIU. Brent Garren, the union’s Deputy General Counsel, emphasized the harmful effects of RealPage’s algorithms on both tenants and workers, noting how rents in high-end buildings set by RealPage can influence entire city markets.

The push for legislative intervention has been bolstered by stories like that of Kevin Weller, a plaintiff in the antitrust lawsuit against RealPage, who faced a significant rent increase and witnessed his neighbors being priced out of their homes.

As the Justice Department continues its investigation into RealPage’s potential antitrust violations, experts like Hartman acknowledge the challenges in proving collusion through an algorithm. Nevertheless, the intense focus on RealPage by federal and local entities underscores a broader movement toward holding tech companies accountable for their role in economic inequality.

The situation is further complicated in states like New Jersey, where laws protect tenants against unreasonable rent increases. This highlights the tension between rising rents and tenant protections.

As investigations and court battles unfold, the impact on the broader rental market and regulatory landscape remains to be seen. Stakeholders across the nation are closely watching these developments, which could potentially reshape the rental housing market and the way technology intersects with housing affordability.

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