Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC, Justice Department file Statement of Interest in another algorithmic rental price fixing case, (Mar 6, 2024)

By Peter Reap, J.D., LL.M.

The filing in a putative class action brought by Washington state tenants against Yardi Systems and landlords, follows a government filing in November in a similar case against RealPage and landlords.

The U.S. Department of Justice and the FTC have submitted a Statement of Interest in a case brought as a putative class action by tenants in the federal district court in Seattle against competing landlords who allegedly participated in a combination or conspiracy in restraint of trade by using the pricing algorithms provided by co-defendant Yardi Systems to artificially inflate multifamily rental prices. The Statement of Interest addresses the government’s argument that competitors violate the Sherman Act of they agree to fix the starting point of pricing (e.g., agree to fix advertised list prices) even if the actual charged prices vary from the advertised starting point. Further, the government argues that such price fixing agreements are per se unlawful regardless of whether the competing landlords adhere to or enforce compliance with the fixed prices. The Statement of Interest in the Yardi Systems case was accompanied with attachments of the Justice Department’s November 2023 statement of interest and accompanying memorandum of law opposing pending dismissal motions in the similar antitrust actions against RealPage, Inc., and various multifamily residential and student housing lessors that are proceeding in the federal district court in Nashville (Duffy v. Yardi Systems, Inc., Case No. 2:23-cv-01391-RSL).

In the Yardi Statement of Interest, the government argues that the defendants’ arguments for dismissal run counter to established antitrust case law. It notes that the RealPage Statement of Interest explains that concerted action can be proven in various ways and does not require proof of parallel conduct and plus factors. Further, the RealPage Statement of Interest explains that, under longstanding Supreme Court precedent, price-fixing agreements among actual or potential competitors are “all banned” whatever their form. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 224 n.59 (1940).

The Yardi Defendants claim that plaintiffs’ failure to allege adherence to Yardi’s recommended prices dooms the amended complaint, but they are wrong: “It is per se illegal for competing landlords to jointly delegate key aspects of their pricing to a common algorithm, even if the landlords retain some authority to deviate from the algorithm’s recommendations,” contends the government. Whether or not the purpose of the conspiracy was accomplished is immaterial, for the violation is the agreement.

“Consonant with this principle, courts have explained that, just as competitors cannot agree to fix their final prices, competitors cannot agree to fix the starting point of their prices; both types of agreements corrupt the decentralized price-setting mechanism in the market, whether or not they ultimately succeed in raising or stabilizing prices.” Thus, case law holds that it per se illegal to fix advertised list prices or sticker prices. Instead of looking for rates of adherence to the agreed to prices, courts instead conclude that the fixed prices necessarily influenced the market and disrupted competition, the Statement of Interest continues. This principle holds in cases such a Yardi and RealPage where there is a joint delegation of pricing recommendations to a common algorithm.

Finally, the government asserts that the defendants in Yardi are wrong to argue that a complaint must allege a binding enforcement mechanism in order to state a valid claim for per se price fixing. The law banning horizontal price fixing agreements as per se illegal, has no such loopholes.

Background on the similar RealPage litigation. In April 2023, the Judicial Panel on Multidistrict Litigation centralized two antitrust actions against RealPage, a software and data analytics provider, and numerous multifamily residential lessors, in the Middle District of Tennessee. One action concerned residential rental price fixing. The other alleged a similar scheme with respect to student housing. Several plaintiffs, including some seeking to represent nationwide classes of lessees, proposed the centralization.

The complaints commonly alleged the lessor defendants used RealPage software to submit daily reports of lease initiations and expirations to RealPage. RealPage analyzed that data and made daily pricing recommendations to the lessors. The lessors then almost always followed the RealPage recommendations, pursuant to allegations about compliance monitoring and enforcement. The arrangement allegedly eliminated competition among the lessors, thereby causing significant price increases for residential real estate rentals.

Separately, District of Columbia Attorney General Brian L. Schwalb announced, in early November 2023, the filing of a broadly similar complaint in the Superior Court of the District of Columbia raising similar allegations against RealPage and 14 of the largest residential landlords in the District. The Justice Department’s Statement of Interest in RealPage opposes the defendants’ pending dismissal motions.

Attorneys: Kenneth H. Merber, Federal Trade Commission. Yixi (Cecilia) Cheng, U.S. Dept. of Justice Antitrust Division.

Companies: Yardi Systems Inc.

News: Antitrust AntitrustDivisionNews FederalTradeCommissionNews WashingtonNews GCNNews