I
n Michigan's largest cities, a property management company called RealPage offers an algorithm to suggest rental prices to corporate landlords. The AI-powered software crunches large datasets to help landlords set monthly prices, but it's now at the center of a "price fixing conspiracy" lawsuit filed by the U.S. Department of Justice. The complaint alleges that RealPage's software allows competing landlords to collude and artificially inflate rents, harming millions of Americans.

    The DOJ claims that RealPage replaces competition with coordination, allowing landlords to share sensitive information about rental rates, lease terms, and occupancy data. This feeds an algorithm that suggests prices in real-time, based on the data from rival landlords. RealPage's software controls 80% of the rental revenue management market, but the company says only 7% of rental units use its software.

    The lawsuit comes as rents have increased by nearly 20% nationally over four years and more than half of Michigan renters struggle to cover housing costs. Anjana Susarla, a Michigan State University professor, notes that powerful algorithms are playing an increasingly significant role in setting prices and reducing competition.

    Landlords who use RealPage's software agree to make "meaningful changes" when using the algorithm and to use it exclusively when giving quotes to potential renters. This alleged agreement makes it a "fairly conventional" price-fixing case, according to University of Michigan law professor Daniel Crane.

    RealPage has pushed back against allegations, saying its revenue management software is legally compliant and was given antitrust clearance in 2017. The company claims that landlords decide their own rent and have 100% discretion on recommendations from the algorithm.

    The RealPage case highlights a larger issue: algorithms are creating a new legal frontier. As technology becomes more pervasive, federal regulators will need to address how algorithms can be used to replace competition with coordination and potentially harm consumers.