26 ms·

Price fixing by algorithm is still price fixing

878 points by nabla9 3y ago

amath 3y ago
Maybe this is a stupid question, but how would airbnb be looked at using this as precedent. If I sign up for airbnb and use their automatic price optimization engine would this fall under the same algorithmic collusion?
trhway 3y ago
[flagged]
- deleted 3y ago
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csa 3y ago
I would like to see that this action will lead to meaningful change in (imho) an unhealthy rental market. Unfortunately, I think the genie is out of the bottle, and the actions by the ftc will be reduced to whack-a-mole attempts to bust transgressors who make the effort to have plausible deniability while still using price-fixing algos.
- nurtbo 3y ago
  Adding to that: once you’ve shown that keeping rates high while allowing greater vacancies works, no one is going to lower rates afterwards. So we are stuck with this higher rent environment.
  - ClumsyPilot 3y ago
    What do you mean? Of course price-fixing and market manipulation works, that’s why criminals do it! There is no limit to Price fixing for inelastic good like food, housing and medicine.
    - nurtbo 3y ago
      Totally agreed. I’m unclear whether eliminating this (or even all) mechanism for price fixing on rent will cause prices to drop.
  - indecisive_user 3y ago
    It's only profitable because of price fixing. You don't have to worry about vacancies when all your competition has agreed not to undercut you. Without the price fixing though, apartment complexes will actually have to compete against each other on rent.
  - deleted 3y ago
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josh-sematic 3y ago
IIUC it’s still valid to use an algorithm to recommend prices, but you’re not allowed to make an agreement with a competitor that you will both use the same alg? Or is this saying that any algorithm which takes competitor prices into account is out-of-bounds?
- spamizbad 3y ago
  The former (you can’t collude with a competitor to use the same algorithm to set prices)
  - lazide 3y ago
    How can you collude with someone you don’t communicate with in any way?
    - dkjaudyeqooe 3y ago
      By using a third party software or service that sets a price, knowing that your competitors are doing the same.
      - SoftTalker 3y ago
        Is it collusion to go to a rental search site and survey the asking rents, then asking similar for your property, knowing that your competitors are (probably) doing the same? Is it collusion when a gas station manager drives around the neighborhood, looks at the competitors posted price for gas, and sets his prices the same?
        dkjaudyeqooe 3y ago
        Neither of those examples are what I described and are perfectly fine. You have to use a third party that is setting a price and stick to that, knowing others are doing the same. You're describing individuals determining their own price using their own judgement.
        3y ago
kirse 3y ago
After pricing auto insurance recently it's pretty obvious this is happening in that industry as well. While shopping around multiple quotes across 7-8 providers and calling at least 5 separate insurance agents to try to gather quotes, all of these companies are providing similar quotes within a few cents/dollars of each other. I vent my frustration to a few agents about the yearly rate increase insanity and they all shrug, give their non-empathetic "I understand" telephone script and blame it on the "system" calculating the prices and make some useless excuse about inflation. I've got a clean driving record, a fully paid-off cheap vehicle, in a reasonably responsible age bracket, and the cost of decent auto insurance these days is essentially another car payment. Within 5 years I'll have paid back the insurance company 60-70% the value of the vehicle. The Gov/FTC needs to take a look at these companies, especially if they're forcing us to hold the insurance to reasonably participate in society.
- tpmoney 3y ago
  Aren't most insurance rates / rate ranges set by the states? And any further variance is down to the actuarial tables? It seems pretty reasonable that most of your quotes would be within a few dollars of each other because they're all insuring the same risk, in the same location, under the same legal framework.
  - kirse 3y ago
    Aren't most insurance rates / rate ranges set by the states? And any further variance is down to the actuarial tables? If that's true, I certainly couldn't find a table on allowable rate ranges when I did some basic research on pricing and what factors influence it. Certainly open to being schooled on how auto insurance works.
    - phonon 3y ago
      It's all publically available. Filings are done through the SERFF system. So Google SERFF and say "NY". (which will take you to https://filingaccess.serff.com/sfa/home/NY https://filingaccess.serff.com/sfa/home/NY ) Then search by carrier, line of business etc. You want "rate" filings. You will find a report by an actuary, lots of justification explaining price changes, correspondence between the company and regulators asking/answering questions, details on how the rate changes will affect current customers, etc. SInce most rate filings are to adjust current in force rates, they don't always repeat all the underlying details. With a little more effort you can look up initial rate filings, and they will walk through methodologies in more detail. Once those prices are filed, they are locked in (for consumer types of insurance). Companies can't deviate in any way. (including giving unauthorized discounts).
standardUser 3y ago
> Rent is up nearly 20% since 2020, with the largest increases concentrated on lower- and middle-tier apartments rented by lower-income consumers. About half of renters now pay more than 30% of their income in rent and utilities, and rising shelter costs were responsible for over two-thirds of January inflation. We need better rent stabilization laws. Not the ones we have in many big cities that result in perpetually skewed markets and $200/mo rents. But a more comprehensive approach including requiring multi-year lease options, 12-month or greater rent increase notice requirements, and rent increase caps that prevent catastrophic rent hikes but still allow units to align with market rates over longer timeframes. Unfortunately, people prefer to strawman the entire concept by pretending that the only "rent control" laws that can exist are like those in NY or SF.
- 58028641 3y ago
  Doesn't rent control just reward people lucky enough to rent before prices increased? Wouldn't increasing supply be a better way to reduce prices?
  - seanmcdirmid 3y ago
    Ya, most rent control just rewards those that are there when it happens, if it applies to new renters, supply eventually seizes up. I’m not sure what model parent thinks will work. Maybe rent control light where price increases are limited but the limit is highish? I can see that working out, limiting increases to 1.5-2X inflation might keep the market fluid and provide some stability to renters without locking new tenants out.
    - malermeister 3y ago
      The secret is for the government to make up for the decrease in private supply. Vienna showed how it's done - see this article for example: https://citymonitor.ai/environment/housing/red-vienna-how-austrias-capital-earned-its-place-in-housing-history https://citymonitor.ai/environment/housing/red-vienna-how-au... There's a reason it's been #1 most livable city in the world on several rankings for years in a row now.
ilikehurdles 3y ago
> an agreement to use shared pricing recommendations, lists, calculations, or algorithms can still be unlawful even where co-conspirators retain some pricing discretion or cheat on the agreement. Someone explain how this is different from pricing vehicles based on KBB or other data? Genuinely curious because I don’t know what these agreements look like. If multiple seller/landlord parties all agree to have a single algorithm set prices I understand the FTC’s point. If however they all reference an algorithmic data point and freely choose to set prices I don’t see how that’s collusion.
- rahimnathwani 3y ago
  If multiple seller/landlord parties all agree to have a single algorithm set prices I understand the FTC’s point. If however they all reference an algorithmic data point and freely choose to set prices I don’t see how that’s collusion. You've hit the nail on the head. It's the former, which is why it's collusion.
  - tyingq 3y ago
    I imagine it's tricky to really prove. Airlines, for example, have been doing somewhat similar things for decades, but there's no simplistic path to showing collusion.
    - ghaff 3y ago
      Pretty much all companies, especially large ones, rely on a series of intermediary sources for things like pricing, salaries, etc. They're not constrained by those sources for individual products, services, and people but they're absolutely aware of them. And it's probably a fairly short distance from there to "We're not going to pay you more than an equivalent level at Google" whether or not that's explicitly stated.
    - willis936 3y ago
      Funny you mention that. One of RealPage's architects has experience in making cartels in the airline industry, and getting caught. The trick to getting caught here is to be very blatant and just pretend the law doesn't exist. https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r... >A genial, self-described “numbers nerd,” Jeffrey Roper was Alaska Airlines’ director of revenue management when it and other major airlines began developing price-setting software in the 1980s. >Competing airlines began using common software to share planned routes and prices with each other before they became public. The technology helped head off price wars that would have lowered ticket prices, the Department of Justice said. >The department said the arrangement may have artificially inflated airfares, estimating the cost to consumers at more than a billion dollars between 1988 and 1992. The government eventually reached settlements or consent decrees for price fixing with eight airlines, including Alaska Airlines, all of which agreed to change how they used the technology.
justinclift 3y ago
Weirdly, the FTC site seems offline: NOTICE: The FTC website is currently unavailable. Thank you for your patience while we work to restore service.
usui 3y ago
> Such software can allow landlords to collude on pricing by using an algorithm—something the law doesn’t allow IRL. When you replace once-independent pricing decisions with a shared algorithm, expect trouble. There are probably other things I should comment on first instead, but this usage of “IRL” made me laugh. I grew up with the initialism IRL while chatting online as a small kid so when I emailed a teacher where I accidentally wrote “IRL”, he quipped, “What? As opposed to us meeting ‘in fake life’?” Now I feel jokingly vindicated against Mr. Teacher as this is the first time I read a government website use IRL. It would seem that algorithms and cyberspace aren’t part of real life to the government, even when it’s about housing price collusion, one of the realest real-life things I can imagine!
- SilasX 3y ago
  Haha yeah that’s often what happens, a useful slang expression becomes so widespread that eventually they accept it in formal context. I joke that, given enough time, the “English future tense” they teach will be “to be gonna”.
  - aaomidi 3y ago
    Language evolution is honestly great. There's a lot of pearl clutching that happens about it, and policing around what's "ok" English or whatever. But yeah, evolution of language is beautiful IMHO.
    - SilasX 3y ago
      Always?
    - trimethylpurine 3y ago
      >IMHO As opposed to your dishonest opinion?
      - trimethylpurine 3y ago
        I'm sad that you took offense and downvoted. I guess you didn't read the first comment? It was meant as a joke on the absurdity of asking what it's opposed to. >I accidentally wrote “IRL”, he quipped, “What? As opposed to us meeting ‘in fake life’?”
foooorsyth 3y ago
As a non-landlord, it seems quite odd that landlords and property managers can’t “collude” on rent pricing. If I were to have a rental property and a management company for it to be hands off, I’d probably want to defer rent setting to the people that understand that local rental market. Both parties have aligned incentives - they want to maximize rent. I guess the government just wants the low-information party to set the pricing? Are there any near-monopoly property management companies in any major metro in the US? Seems like they’re a dime a dozen with lots of competition — doesn’t seems very anti-trust-worthy to me, but what do I know?
- quasse 3y ago
  It's not understanding the local rental market that's the problem. It's controlling enough of it that you can influence prices globally upwards outside of economic competition. If 60% of a city's major property companies sign on with RealPage and *also* agree that they will not undercut the prices RealPage chooses (eliminating economic competition between the property companies), that's not just being a high information party, it's collusion. The problem is that housing in major cities has a relatively fixed supply, so the colluding landlords know that even if a competitor undercuts them eventually they will simply fill their units and cease to be competition for new renters.
- apendleton 3y ago
  Yes, the companies targeted here aren't property managers themselves, they sell software to property managers, and have ended up providing services to many ostensibly-competing managers and building owners in some metro areas, who collectively control enough of the rental market in those areas that they can "maximize rent" by moving the whole market up in concert rather than having any of the owners actually compete with one another. From a ProPublica piece [1] about it, for example: > In one neighborhood in Seattle, ProPublica found, 70% of apartments were overseen by just 10 property managers, every single one of which used pricing software sold by RealPage. [1] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
  - 3y ago
thelastgallon 3y ago
YieldStar software helps landlords set prices for apartments across the U.S: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r... "To arrive at a recommended rent, the software deploys an algorithm — a set of mathematical rules — to analyze a trove of data RealPage gathers from clients, including private information on what nearby competitors charge. For tenants, the system upends the practice of negotiating with apartment building staff. RealPage discourages bargaining with renters and has even recommended that landlords in some cases accept a lower occupancy rate in order to raise rents and make more money. One of the algorithm’s developers told ProPublica that leasing agents had “too much empathy” compared to computer generated pricing."
- deleted 3y ago
  [deleted]
- SoftTalker 3y ago
  Say I own a house, and want to rent it out. I'm naturally going to go onto rental search sites and look at what similar houses in the area are renting for, and probably ask something pretty close to that. I would assume this is not illegal because it's using public information and not colluding with any competitors on price. But subscribing to a service that uses an algorithm that does basically the same thing is (might be) illegal? Does it cross the line when I explicitly agree with competitors that we'll all use the same algorithm? Or if we're all just independently using the popular pricing service could that become illegal? Or if the service agreement requires me to not rent for less than their algorithm calculates?
  - 10000truths 3y ago
    What makes it collusion is the fact that others are using it as well, so the answer to your questions is yes. My understanding is that there's nothing wrong with building your own software that crawls public information and computes a price for you - the key thing is that it has to be your own, you can't distribute that software to others.
lifeisstillgood 3y ago
Wait. If landlords gather information about all other rents in the country, and then use that to set a price for their rents, that, cannot surely, be price fixing. So is the problem the “RENTmaximizer” software and other services that basically gather price information ? Because if perfect price information is available, and yet there is no competition in the market driving prices down, well, that’s rentier markets for you. There must be an economics PhD or two in that
- chefandy 3y ago
  From the blog post: Algorithms that recommend prices to numerous competing landlords threaten to remove renters’ ability to vote with their feet and comparison-shop for the best apartment deal around. From the brief: To participate in the service, landlords must share in “real-time” their “non-public,” “competitively sensitive” data, including actual rents paid, occupancy rates, and records of lease transactions. [Multifamily Compl. ¶¶ 227, 380.] RealPage then feeds “this data into a common algorithm.” [Student Compl. ¶ 5;] [Multifamily Compl. ¶ 380.] The common algorithm uses these common data for a single, common purpose: to generate “forward-looking, unit-specific pricing and supply recommendations” for all participating landlords. [Student Compl. ¶ 5.] To ensure that the landlords abide by these “recommendations,” RealPage puts significant “pressure” on them “to implement RealPage’s prices,” including by requiring clients to submit requests to deviate to the “corporate office” and tracking the “identity of the client’s staff that requested a deviation.” [Multifamily Compl. ¶¶ 17-20, 261-86.] As a result, landlords using RealPage adopt RealPage’s recommendations 80-90% of the time. [Id. ¶ 15.] The complaints allege that RealPage was clear about the purpose of its common pricing scheme: to increase prices above competitive levels through collaboration. Doesn't sound like the natural ebb and flow of the market to me.
  - scrps 3y ago
    That sounds like a dark pool for the rental market.
    - kristjansson 3y ago
jhanschoo 3y ago
> Such software can allow landlords to collude on pricing by using an algorithm—something the law doesn’t allow IRL. When you replace once-independent pricing decisions with a shared algorithm, expect trouble. Enjoyable to watch norms about language (IRL) change.
- berniedurfee 3y ago
  I was thinking the same thing. I had to double check that was an article on a .gov website. I think it’s refreshingly well written and accessible. Not an 800 page blob of legalese. Nice job to the authors.
- Atheros 3y ago
  Having adults give this a once-over would have been better. Does the law allow collusion online rather than IRL? This sentence implies that it does, otherwise the "IRL" is superfluous. Most (but not all) of us know, based on our knowledge and experience with zoomer writing, that the writer is not speaking literally or carefully. But this is a summary of a legal document and can be used in a court of law. This writing is terrible given the context. It's not the only example of bad writing. > And even if some of the conspirators cheat by starting with lower prices than those the algorithm recommended, that doesn’t necessarily change things. Being bad at breaking the law isn’t a defense. Breaking the law less or not at all is indeed a defense, possibly a successful one. It also doesn't constitute being "bad" at breaking the law. Lots of people who work in government agencies feel that it is okay to lie to the public to try to achieve greater goods. They are wrong.
miiiiiike 3y ago
I lived in a building that was owned by a hedge fund and used algorithmic pricing. It was frustrating to know the vacancy rate in the building, how desperate the sales people were for residents, and still be told that rent was going up hundreds of dollars a month because of demand in the region. Another thing they did was to offer lower rent if you moved into a unit that was vacant. They ”incentivized” people to move every year instead of just increasing the rent a reasonable amount. I’m talking rent going up $500-$1,000/month unless you moved into the identical unit next door. Most of the people in the build paid the increases but we were young so we moved. Our first year we lived in a small 1br. When the lease came up they wanted to increase our rent by $600/month. We opted to move into a huge 2br with limited light that had been vacant for a year or two. When our lease on that one came up they wanted to more than double our rent because there was such high demand for the unit. We were the demand.
- scotty79 3y ago
  I don't know how regulators can look at this number of vacancies and conclude that yes, the taxation on property with vaccancies is as high as it should be.
  - lotsofpulp 3y ago
    Should be a formula that keeps increasing the tax liability per empty month, so eventually the owner has to dump it for zero or give it back to the government.
    - bluGill 3y ago
      You want a number of empty units in your city so that if you want to move there is a place to move to. No empty units means someone does without. You don't want too many empty units of course. some is needed. this price fixing is partially about units not even for rent which is a different problem you don't want. (but you want some units not for rent while they remodel)
  - screenobobeano 3y ago
    I am really a proponent of the Chinese system. I’m a real estate investor and this “free market” isn’t going to last much longer since owning vacant homes will net you more than virtually anything else you could do legally. Real Estate is a free money machine, and it won’t stop until we adopt realistic government controlled system.
deleted 3y ago
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virtualwhys 3y ago
[flagged]
- Rapzid 3y ago
  That's an interesting dynamic at play. I'm sure regulators around the world are working around the clock on figuring out how to deal with AirBnb lol.
- deleted 3y ago
  [deleted]
dclowd9901 3y ago
There’s no other way around this but to shut down industries that provide this kind of service make it illegal to have automatic price setting.
HaukeHi 3y ago
Isn't Airbnb doing the same?
- wolverine876 3y ago
  How so? Is Airbnb colluding with competitors?
  - aaomidi 3y ago
    I think Airbnb recommends a price to set your place to? I know there's also some external software that do that too. Based on the understanding of the post, I think both of those would be considered price colluding.
- petesergeant 3y ago
  No, because Airbnb is sharing market information with you, and is quite happy for you to undercut the market to drum up demand, or raise prices if you think you’ve got a winner, which keeps market efficiencies intact. What’s described in the article is a bunch of estate agents agreeing to use a price recommended by 3rd party software and minimize cheating on that price, which is price fixing.
jeffbee 3y ago
I don't get how this FTC position is compatible with the existence of things like commodity futures markets. A second point that bothers me about the blog post. It's immaterial to the brief, but the blog says the rent is up 20% since 2020, citing CPI-U. But it fails to account for increasing incomes. Median household incomes, nationwide, have kept pace with rents.
- arming9513 3y ago
  If income has raised by 20%, why should you expect rent to also increase by the same amount?
  - jeffbee 3y ago
    Because it's a market operating point set by supply and demand. Increasing incomes support demand and raise prices.
    - Eisenstein 3y ago
      Why do increasing incomes support demand? I am not going to move to another place exactly the same just because I make more money. In order for prices to increase, I would have to be moving into a better place than I am in now, which means it would cost more anyway. Me moving laterally gives me no utility.
      - jeffbee 3y ago
        In the American rental market, for most lessees, the lessor can raise the price an arbitrary amount periodically. This is true for virtually all tenancies in this country.
        Eisenstein 3y ago
        Sounds like that isn't a market force if they do it without demand changing.
    - 3y ago
xbar 3y ago
Maximum prison sentences, please.
buzer 3y ago
If this lawsuit is successful, would renters have standing to sue for damages? And how far would the liability go, just their landlord + RealPage (who is probably bankrupt by that point)? Or would everyone who colluded to keep prices high be liable, possibly even to renters whose landlord was not part of collusion but rents in the area increased due this?
advael 3y ago
I think the only reason this should be surprising is that we've let it be the status quo for so long, despite being pretty obviously illegal. Nonetheless it's good that the FTC has explicitly made a commitment to start enforcing the law
- nerdponx 3y ago
  It's nice when federal agencies are funded and led by people who aren't trying to sabotage them from the inside. Ignoring all other considerations, the current incumbent political party in the US presidency on average tends to produce effective & functioning federal agencies, and the other party on average tends to produce corrupt & dysfunctional federal agencies. I try to point this out frequently because voters tend to ignore this kind of thing until it affects them personally, or they read about some isolated grievance in the news. But it really should be considered a more important topic.
  - staplers 3y ago
    voters tend to ignore this kind of thing until it affects them personally And when it finally becomes a problem that cannot be ignored, scapegoats will be found and used, even if they have to be invented in a fairy tale (internet conspiracy).
    - advael 3y ago
      Often it suffices to blame the agencies themselves, citing the very failures caused by mismanagement, corruption, and underfunding as evidence of the foolishness of using government agencies to do things. This in turn is the kind of nonsense you can get people to believe if you've systematically misinformed them while also convincing them they can't trust other sources, which is another well-known strategy of the same political faction
  - gotoeleven 3y ago
    >and the other party on average tends to produce corrupt & dysfunctional federal agencies the federal agencies are mostly employees have been there through many administrations. How do they suddenly become corrupt and dysfunctional besides these employees (90% of the current incumbent political party) suddenly becoming corrupt and dysfunctional?
ummonk 3y ago
I don't understand how it's possible that every single biglaw firm offers the exact same starting salary but that isn't considered illegal collusion, while landlords using a market-estimation service as a starting point for pricing their units (but sometimes pricing below or above the algorithm's recommended price) is considered illegal collusion.
- d0gsg0w00f 3y ago
  Probably because legal defense outside of public defender is considered a luxury good. And it's rare to need a public defender if you're living a "normal" life. With housing, everybody has to live _somewhere_.
- killingtime74 3y ago
  (studied competition law in law school). Everyone having the same starting salary can be arrived at by non-illegal means, such as seeing what the others are offering and matching. To successfully prosecute for price fixing you need actual evidence of collusion. That is usually obtained by whistleblowing, as the first person usually gets a reduced sentence (example: https://www.accc.gov.au/media-release/cartel-immunity-policy-strengthened-whistleblowing-tool-launched https://www.accc.gov.au/media-release/cartel-immunity-policy...). Price fixing in buying/hiring is not monopoly btw, it's monopsony.
  - aerhardt 3y ago
    Sorry to nitpick on this tangential detail, but what does “reduced sentence” entail? On paper it sounds like many people would rather take the secret to their graves.
    - killingtime74 3y ago
      It's not tangential at all. Depends on jurisdiction and policy by prosecuting authorities. Could be smaller fine, to complete immunity. I'm not familiar with American case law but I remember seeing that Matt Damon film "The Informant" that is based on a true story. The whistleblower (Matt Damon) was going to get complete immunity as he was the first to tell the FBI. https://en.wikipedia.org/wiki/Lysine_price-fixing_conspiracy https://en.wikipedia.org/wiki/Lysine_price-fixing_conspiracy. He ended up having his immunity rescinded for other reasons.
exabrial 3y ago
I'd like to see thousands of apartments hand back the increases to renters they illegally collected.
tz18 3y ago
Could this change how tech salaries are set? I know many companies base their salary grades on an algorithm that amounts to looking at what "comparable" companies are doing and aiming for the middle of that.
- WirelessGigabit 3y ago
  That would be nice. It's such an easy defense for companies to say: this is what the market pays.
- silisili 3y ago
  They're seemingly already doing that for benefits. I've had benefits reduced at two separate places 'because our research shows we were a little over for similar companies.' If that's not collusion, I don't know what is.
  - cperciva 3y ago
    Collusion is if they, well, collude. Copying is not the same thing as colluding.
    - acuozzo 3y ago
      At some point copying does become tacit collusion, though.
      - willis936 3y ago
        No. Collusion requires agreement among the parties to not compete. Sure they copy but no one is forcing you to stay at the company or accept the new job offer. You walk to somewhere that does meet your ask or negotiate. It's collision when companies agree to not compete.
        acuozzo 3y ago
        https://en.wikipedia.org/wiki/Tacit_collusion https://en.wikipedia.org/wiki/Tacit_collusion
trimethylpurine 3y ago
Lots of people are saying it's the same as doing it manually with public data. I don't think that's the issue. The article is explaining that the focus is the shared pricing database. Public information doesn't tell you if competitors will underprice to sink you, or if they are likely to hold a high price even against lower occupancy. This software tells you and your competitors whether or not to do that, and bases that guidance on its inside knowledge of its own customer base. That is what the FTC and DoJ are calling collusion, based on my reading of the article.
deleted 3y ago
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jml7c5 3y ago
As a renter myself, I have tremendous sympathy for the tenants affected by this. But there is a way to frame this whole saga that makes it much more innocuous: By maximizing individual profit, the software rapidly finds the real fair market value of rentals. It turns out that the fair market value for rentals is much higher than people thought! This should make sense: housing supply is low, housing demand is high, and housing demand is extremely inelastic. It is a situation where egregious profits should be expected! Landlords simply hadn't realized that they could charge more. There is one seemingly illogical result, which is that some units go vacant despite the huge demand. But unsold goods are a normal part price discovery, and we are not talking about a huge change: occupancy rates only drop a few percent. It's a brutal result for tenants, but the alternative is incorrect pricing, which has its own negative implications for the whole market.
- Dylan16807 3y ago
  > the software rapidly finds the real fair market value of rentals. That's cool and all but the price should be somewhere between the supplier cost and the purchaser value, not pegged at the top. > real fair market value Only if there's strong competition.
  - jml7c5 3y ago
    >between the supplier cost and the purchaser value It is — it just turns out that the purchaser value is quite high!
    - Dylan16807 3y ago
      The value of not being homeless is extremely high. Which is an objectively bad price for housing.
- willseth 3y ago
  With price fixing, would-be competitors cooperate and function as a monopoly. That’s not a functioning market. These services act as a centralization point to accomplish the price fixing without colluding directly with each other. It’s actually much more efficient than traditional price fixing!
refurb 3y ago
One interesting things that Singapore does is that it collects and shares all rental data. When you lease a place to a tenant, there is a stamp duty ($100+) that the tenant pays. Then the landlord submits details about square footage, number of rooms, and the price it was rented at. Then the government shares the data in an aggregate manner: https://www.ura.gov.sg/Corporate/Property/Property-Data/Private-Residential-Properties https://www.ura.gov.sg/Corporate/Property/Property-Data/Priv...
hnburnsy 3y ago
>The Department of Justice has previously secured a guilty plea related to the use of pricing algorithms to fix prices in online resales. This is no idle threat. Be sure to click on that link and find out that in 2018 the FTC stopped the greedy corporate profiteers in the wall poster industry from price fixing back in 2013. Algorithmic price fixers beware.
hnburnsy 3y ago
Arizona AG sued RealPage and a number of apartment owners over this. The AG said RP covers 70% of the market. Complaint here... https://mcusercontent.com/cc1fad182b6d6f8b1e352e206/files/25cb1afd-70b3-f0e4-ac4b-4b63a06ee0e4/RealPage_Complaint.pdf https://mcusercontent.com/cc1fad182b6d6f8b1e352e206/files/25...
maerF0x0 3y ago
First off. I dont like collusion or rental pricing software that colludes across companies. However, now this means really big companies can use their own internal data to get advantages that littler players cannot. I also do not like laws that favor big companies over little ones. With the collusion software then littler companies could at least band together to get similar competitive effects that larger companies can. I'm open to discussion of how to resolve that though, any ideas?
- willis936 3y ago
  Simple: the big players will need to compete again. They can charge high rates but they will face high vacancy in the face of nearby housing units interested in low vacancy.
- Jochim 3y ago
  Kill the larger companies.
- yardie 3y ago
  Collusion is illegal. Period. Doesn’t matter if a big landlord or little landlord are doing it.
  - maerF0x0 3y ago
    Yeah on further reflection and 24 hours to think on it. What I'm describing is covered by antitrust. Many players are not allowed to collude. If a player gets too big it faces antitrust / monopoly issues.
mizzao 3y ago
Is every FTC article usually written in this accessible and readable language?
gorgoiler 3y ago
Lots of tech companies use Ravio, Pave, etc to track the compensation their competitors are offering employees at similar levels. These tools plug straight into your payroll to give all the participants “live” market data. Isn’t this also price fixing?
- rocqua 3y ago
  Is it recommending salaries? The issue with the rent thing is that the algorithm sets a price, so collusion could easily be offloaded onto the algorithm. Something similar should also happen with salaries before this becomes a real problem right?
- galdosdi 3y ago
  If they have material nonpublic information about salaries and share it for the purpose of coordinating salaries, then yes, this is or should be illegal price fixing. They can solve the problem by making the data public, thus giving the same competitive negotiation advantage to the employee. The publicness is the key part -- it's price fixing when They trade information with Each Other, information that is unavailable to You and is essentially valuable to both sides in negotiating an employment offer
EchoReflection 3y ago
"rent is up nearly 20% since 2020" but is that taking into account the change in the value of the dollar and changes in the consumer price index? https://www.in2013dollars.com/us/inflation/2020?amount=1 https://www.in2013dollars.com/us/inflation/2020?amount=1 $1 in 2020 is equivalent in purchasing power to about $1.19 today, an increase of $0.19 over 4 years. The dollar had an average inflation rate of 4.48% per year between 2020 and today, producing a cumulative price increase of 19.17%. This means that today's prices are 1.19 times as high as average prices since 2020, according to the Bureau of Labor Statistics consumer price index. A dollar today only buys 84.034% of what it could buy back then. gas was $3.22 in 2020 but is 42.17% higher in 2024, so by that metric rent is proportionally lower (than the 20% increase in rent) Things changed rather dramatically, theoretically,because of different presidential puppet-string-pulling in terms of the FTC: https://www.skadden.com/insights/publications/2021/06/lina-khans-appointment-as-ftc-chair https://www.skadden.com/insights/publications/2021/06/lina-k... https://www.bbc.com/news/world-us-canada-55738746 https://www.bbc.com/news/world-us-canada-55738746 After less than 24 hours in office Biden signed 15 executive orders whereas Trump had signed 8 after two weeks (Obama had signed 9 after two weeks). https://www.bbc.com/news/world-us-canada-55738746 https://www.bbc.com/news/world-us-canada-55738746 information that comes from government agencies is almost always data that has been arranged in such a way as to make those in power look like they're the good guys.
- isthatafact 3y ago
  Considering that rent is around a one third contribution to US inflation measuremnt (which is done by some indirect estimation), I would also ask how much inflation that software caused by essentially a feedback loop.
SergeAx 3y ago
Is there a way to keep rent prices in check without strong market regulations? Every business will do everything legal to max out the profit, this is a nature of business. Freezing prices in some places will only rise it everywhere around. Building more is not an answer: most large cities has no adequate lots for new buildings, and where they do - it is undeveloped areas, where no one wants to live. We thought that cars is answer, but cars only deferred the market saturation, plus we need more roads and parkings. Remote work may be an answer, but people still need schools, shops and restaurants.
globalnode 3y ago
these services are a form of collusion that basically bypass normal supply and demand and are effectively anti-free market. i can see it being ok if all the properties were owned by one person (which they aren't) but then the gov't would be within its rights to go break it up as an unfair monopoly. which i might add, is a monopoly on a basic human need for shelter. a right even? this is corrupt greed at its worst, market manipulation at best.
pipes 3y ago
Price fixing is when two or more land lords agree to not lower their prices beyond a certain point. There is no agreement here. I don't see how this is price fixing.
- rsaxvc 3y ago
  You could review their argument: https://www.ftc.gov/system/files/ftc_gov/pdf/YardiSOI-filed%28withattachments%29_0.pdf https://www.ftc.gov/system/files/ftc_gov/pdf/YardiSOI-filed%... Search for "adherence to the agreed-upon Prices", "fix list price", and "Express delegation". They argue that collusion through delegation counts as price fixing. They argue colluding to set list prices even when there isn't a price floor is price fixing. They argue that replacing the delegation with an algorithm is still price fixing. Most of their arguments are based on already settled cases.
- yunwal 3y ago
  In this case, it's price fixing because two or more landlords are agreeing to not lower their prices beyond a certain point.
koliber 3y ago
This is a case of information asymmetry being used as an additional advantage by property managers. The software cited, RENTMaximizer, offers aggregate price information for property managers with the aim of maximizing prices. Would a RENTMinimizer product, given away for free to tenants, help? It would show aggregate rents that tenants pay, including minimum ones, with the hope that they can use this information for more confidence when negotiating rents.
- harvey9 3y ago
  No, it is an agreement between suppliers to set prices. Per TFA, one of the goals is to prevent property managers from negotiating with tenants.
renewiltord 3y ago
That seems obvious. Otherwise my Cartel LLC can just provide price-fixing software that you can white box to bypass anti-price-fixing laws.
madsbuch 3y ago
Tangential to this: In Norway and Denmark (as the only countries AFAIK) there are laws stating that a unit needs to have inhabitants. Ie. it can not sit still on the market. If the owner does not live there, he has to rent it out. It baffles me, that this is not a general rule as it forces fair market prices for a illiquid supply (it takes time to build new housing, if it is even possible). In this case you'd just complain that a company keeps units vacant to the municipality who would fine the company until it is brought in order.
- distances 3y ago
  Berlin has similar legislation. I doubt there's much enforcement about it, I would imagine that someone has to file a complaint or something before anything happens for an empty flat.
- amsterdorn 3y ago
  Would be a highly effective way to increase housing supply, but this would favor people over govt/big firms & that doesn't happen in the US (sadly).
- dublinben 3y ago
  Despite what is going on with this rent price collusion situation, the problem that high priced cities face is far too few vacant apartments not too many. The vacancy rate in some places is as low as 1-2%, which is much lower than it should be.
  - madsbuch 3y ago
    Oh yes, I completely agree. These are also issues in both Oslo and Copenhagen. But having rules like this removes some speculation.
c0balt 3y ago
> [..] a brief filed by the FTC and the Department of Justice offers a helpful guideline for antitrust compliance: your algorithm can’t do anything that would be illegal if done by a real person. That one weird trick that doesn't work well under the law.
- xattt 3y ago
  Has this defence worked for people caught up in copyright infringement lawsuits who claim that an infringing torrent download was initiated by something like Sonarr/Radarr?
dmitrygr 3y ago
since when did the FTC switch to SMS-speak? > Such software can allow landlords to collude on pricing by using an algorithm—something the law doesn’t allow IRL. "IRL"?
tqi 3y ago
Mercer is an 80 year old, 25K employee "consulting" firm that makes over $2B per year primarily by providing human resources consulting, ie helping firms set salaries. Why is that not considered price fixing, under the same collusion rationale?
- soerxpso 3y ago
  It would probably be relevant that Mercer doesn't ever say, "Don't hire anyone for this position if you can't get someone willing to do it for the market price." (I'm assuming they don't.) You can advise people on how to set the prices of things, and you can advise a lot of people at the same time, you just can't advise them to participate in what essentially amounts to reverse collective bargaining.
  - tqi 3y ago
    I'm honestly still not clear on the distinction. > Agreeing to use an algorithm is an agreement. In algorithmic collusion, a pricing algorithm combines competitor data and spits out the suggested “maximized” rent for a unit given local conditions. This sounds exactly like what a compensation consultant does (collect competitor data, including data from other clients, and suggest a comp range)?
parentheses 3y ago
I feel this is a good way to think of regulating AI. Think of the AI as a person and apply law accordingly.
sara44444444 3y ago
[flagged]

878 points by nabla9 3y ago

Maybe this is a stupid question, but how would airbnb be looked at using this as precedent. If I sign up for airbnb and use their automatic price optimization engine would this fall under the same algorithmic collusion?

trhway 3y ago

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deleted 3y ago
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csa 3y ago

I would like to see that this action will lead to meaningful change in (imho) an unhealthy rental market. Unfortunately, I think the genie is out of the bottle, and the actions by the ftc will be reduced to whack-a-mole attempts to bust transgressors who make the effort to have plausible deniability while still using price-fixing algos.

nurtbo 3y ago
Adding to that: once you’ve shown that keeping rates high while allowing greater vacancies works, no one is going to lower rates afterwards. So we are stuck with this higher rent environment.
- ClumsyPilot 3y ago
  What do you mean? Of course price-fixing and market manipulation works, that’s why criminals do it! There is no limit to Price fixing for inelastic good like food, housing and medicine.
  - nurtbo 3y ago
    Totally agreed. I’m unclear whether eliminating this (or even all) mechanism for price fixing on rent will cause prices to drop.
- indecisive_user 3y ago
  It's only profitable because of price fixing. You don't have to worry about vacancies when all your competition has agreed not to undercut you. Without the price fixing though, apartment complexes will actually have to compete against each other on rent.
- deleted 3y ago
  [deleted]

josh-sematic 3y ago

IIUC it’s still valid to use an algorithm to recommend prices, but you’re not allowed to make an agreement with a competitor that you will both use the same alg? Or is this saying that any algorithm which takes competitor prices into account is out-of-bounds?

spamizbad 3y ago
The former (you can’t collude with a competitor to use the same algorithm to set prices)
- lazide 3y ago
  How can you collude with someone you don’t communicate with in any way?
  - dkjaudyeqooe 3y ago
    By using a third party software or service that sets a price, knowing that your competitors are doing the same.
    - SoftTalker 3y ago
      Is it collusion to go to a rental search site and survey the asking rents, then asking similar for your property, knowing that your competitors are (probably) doing the same? Is it collusion when a gas station manager drives around the neighborhood, looks at the competitors posted price for gas, and sets his prices the same?
      - dkjaudyeqooe 3y ago
        Neither of those examples are what I described and are perfectly fine. You have to use a third party that is setting a price and stick to that, knowing others are doing the same. You're describing individuals determining their own price using their own judgement.
      - 3y ago

kirse 3y ago

After pricing auto insurance recently it's pretty obvious this is happening in that industry as well. While shopping around multiple quotes across 7-8 providers and calling at least 5 separate insurance agents to try to gather quotes, all of these companies are providing similar quotes within a few cents/dollars of each other. I vent my frustration to a few agents about the yearly rate increase insanity and they all shrug, give their non-empathetic "I understand" telephone script and blame it on the "system" calculating the prices and make some useless excuse about inflation. I've got a clean driving record, a fully paid-off cheap vehicle, in a reasonably responsible age bracket, and the cost of decent auto insurance these days is essentially another car payment. Within 5 years I'll have paid back the insurance company 60-70% the value of the vehicle. The Gov/FTC needs to take a look at these companies, especially if they're forcing us to hold the insurance to reasonably participate in society.

tpmoney 3y ago
Aren't most insurance rates / rate ranges set by the states? And any further variance is down to the actuarial tables? It seems pretty reasonable that most of your quotes would be within a few dollars of each other because they're all insuring the same risk, in the same location, under the same legal framework.
- kirse 3y ago
  Aren't most insurance rates / rate ranges set by the states? And any further variance is down to the actuarial tables? If that's true, I certainly couldn't find a table on allowable rate ranges when I did some basic research on pricing and what factors influence it. Certainly open to being schooled on how auto insurance works.
  - phonon 3y ago
    It's all publically available. Filings are done through the SERFF system. So Google SERFF and say "NY". (which will take you to https://filingaccess.serff.com/sfa/home/NY https://filingaccess.serff.com/sfa/home/NY ) Then search by carrier, line of business etc. You want "rate" filings. You will find a report by an actuary, lots of justification explaining price changes, correspondence between the company and regulators asking/answering questions, details on how the rate changes will affect current customers, etc. SInce most rate filings are to adjust current in force rates, they don't always repeat all the underlying details. With a little more effort you can look up initial rate filings, and they will walk through methodologies in more detail. Once those prices are filed, they are locked in (for consumer types of insurance). Companies can't deviate in any way. (including giving unauthorized discounts).

standardUser 3y ago

> Rent is up nearly 20% since 2020, with the largest increases concentrated on lower- and middle-tier apartments rented by lower-income consumers. About half of renters now pay more than 30% of their income in rent and utilities, and rising shelter costs were responsible for over two-thirds of January inflation. We need better rent stabilization laws. Not the ones we have in many big cities that result in perpetually skewed markets and $200/mo rents. But a more comprehensive approach including requiring multi-year lease options, 12-month or greater rent increase notice requirements, and rent increase caps that prevent catastrophic rent hikes but still allow units to align with market rates over longer timeframes. Unfortunately, people prefer to strawman the entire concept by pretending that the only "rent control" laws that can exist are like those in NY or SF.

58028641 3y ago
Doesn't rent control just reward people lucky enough to rent before prices increased? Wouldn't increasing supply be a better way to reduce prices?
- seanmcdirmid 3y ago
  Ya, most rent control just rewards those that are there when it happens, if it applies to new renters, supply eventually seizes up. I’m not sure what model parent thinks will work. Maybe rent control light where price increases are limited but the limit is highish? I can see that working out, limiting increases to 1.5-2X inflation might keep the market fluid and provide some stability to renters without locking new tenants out.
  - malermeister 3y ago
    The secret is for the government to make up for the decrease in private supply. Vienna showed how it's done - see this article for example: https://citymonitor.ai/environment/housing/red-vienna-how-austrias-capital-earned-its-place-in-housing-history https://citymonitor.ai/environment/housing/red-vienna-how-au... There's a reason it's been #1 most livable city in the world on several rankings for years in a row now.

ilikehurdles 3y ago

> an agreement to use shared pricing recommendations, lists, calculations, or algorithms can still be unlawful even where co-conspirators retain some pricing discretion or cheat on the agreement. Someone explain how this is different from pricing vehicles based on KBB or other data? Genuinely curious because I don’t know what these agreements look like. If multiple seller/landlord parties all agree to have a single algorithm set prices I understand the FTC’s point. If however they all reference an algorithmic data point and freely choose to set prices I don’t see how that’s collusion.

rahimnathwani 3y ago
If multiple seller/landlord parties all agree to have a single algorithm set prices I understand the FTC’s point. If however they all reference an algorithmic data point and freely choose to set prices I don’t see how that’s collusion. You've hit the nail on the head. It's the former, which is why it's collusion.
- tyingq 3y ago
  I imagine it's tricky to really prove. Airlines, for example, have been doing somewhat similar things for decades, but there's no simplistic path to showing collusion.
  - ghaff 3y ago
    Pretty much all companies, especially large ones, rely on a series of intermediary sources for things like pricing, salaries, etc. They're not constrained by those sources for individual products, services, and people but they're absolutely aware of them. And it's probably a fairly short distance from there to "We're not going to pay you more than an equivalent level at Google" whether or not that's explicitly stated.
  - willis936 3y ago
    Funny you mention that. One of RealPage's architects has experience in making cartels in the airline industry, and getting caught. The trick to getting caught here is to be very blatant and just pretend the law doesn't exist. https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r... >A genial, self-described “numbers nerd,” Jeffrey Roper was Alaska Airlines’ director of revenue management when it and other major airlines began developing price-setting software in the 1980s. >Competing airlines began using common software to share planned routes and prices with each other before they became public. The technology helped head off price wars that would have lowered ticket prices, the Department of Justice said. >The department said the arrangement may have artificially inflated airfares, estimating the cost to consumers at more than a billion dollars between 1988 and 1992. The government eventually reached settlements or consent decrees for price fixing with eight airlines, including Alaska Airlines, all of which agreed to change how they used the technology.

justinclift 3y ago

Weirdly, the FTC site seems offline: NOTICE: The FTC website is currently unavailable. Thank you for your patience while we work to restore service.

usui 3y ago

> Such software can allow landlords to collude on pricing by using an algorithm—something the law doesn’t allow IRL. When you replace once-independent pricing decisions with a shared algorithm, expect trouble. There are probably other things I should comment on first instead, but this usage of “IRL” made me laugh. I grew up with the initialism IRL while chatting online as a small kid so when I emailed a teacher where I accidentally wrote “IRL”, he quipped, “What? As opposed to us meeting ‘in fake life’?” Now I feel jokingly vindicated against Mr. Teacher as this is the first time I read a government website use IRL. It would seem that algorithms and cyberspace aren’t part of real life to the government, even when it’s about housing price collusion, one of the realest real-life things I can imagine!

SilasX 3y ago
Haha yeah that’s often what happens, a useful slang expression becomes so widespread that eventually they accept it in formal context. I joke that, given enough time, the “English future tense” they teach will be “to be gonna”.
- aaomidi 3y ago
  Language evolution is honestly great. There's a lot of pearl clutching that happens about it, and policing around what's "ok" English or whatever. But yeah, evolution of language is beautiful IMHO.
  - SilasX 3y ago
    Always?
  - trimethylpurine 3y ago
    >IMHO As opposed to your dishonest opinion?
    - trimethylpurine 3y ago
      I'm sad that you took offense and downvoted. I guess you didn't read the first comment? It was meant as a joke on the absurdity of asking what it's opposed to. >I accidentally wrote “IRL”, he quipped, “What? As opposed to us meeting ‘in fake life’?”

foooorsyth 3y ago

As a non-landlord, it seems quite odd that landlords and property managers can’t “collude” on rent pricing. If I were to have a rental property and a management company for it to be hands off, I’d probably want to defer rent setting to the people that understand that local rental market. Both parties have aligned incentives - they want to maximize rent. I guess the government just wants the low-information party to set the pricing? Are there any near-monopoly property management companies in any major metro in the US? Seems like they’re a dime a dozen with lots of competition — doesn’t seems very anti-trust-worthy to me, but what do I know?

quasse 3y ago
It's not understanding the local rental market that's the problem. It's controlling enough of it that you can influence prices globally upwards outside of economic competition. If 60% of a city's major property companies sign on with RealPage and *also* agree that they will not undercut the prices RealPage chooses (eliminating economic competition between the property companies), that's not just being a high information party, it's collusion. The problem is that housing in major cities has a relatively fixed supply, so the colluding landlords know that even if a competitor undercuts them eventually they will simply fill their units and cease to be competition for new renters.
apendleton 3y ago
Yes, the companies targeted here aren't property managers themselves, they sell software to property managers, and have ended up providing services to many ostensibly-competing managers and building owners in some metro areas, who collectively control enough of the rental market in those areas that they can "maximize rent" by moving the whole market up in concert rather than having any of the owners actually compete with one another. From a ProPublica piece [1] about it, for example: > In one neighborhood in Seattle, ProPublica found, 70% of apartments were overseen by just 10 property managers, every single one of which used pricing software sold by RealPage. [1] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
- 3y ago

thelastgallon 3y ago

YieldStar software helps landlords set prices for apartments across the U.S: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r... "To arrive at a recommended rent, the software deploys an algorithm — a set of mathematical rules — to analyze a trove of data RealPage gathers from clients, including private information on what nearby competitors charge. For tenants, the system upends the practice of negotiating with apartment building staff. RealPage discourages bargaining with renters and has even recommended that landlords in some cases accept a lower occupancy rate in order to raise rents and make more money. One of the algorithm’s developers told ProPublica that leasing agents had “too much empathy” compared to computer generated pricing."

deleted 3y ago
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SoftTalker 3y ago
Say I own a house, and want to rent it out. I'm naturally going to go onto rental search sites and look at what similar houses in the area are renting for, and probably ask something pretty close to that. I would assume this is not illegal because it's using public information and not colluding with any competitors on price. But subscribing to a service that uses an algorithm that does basically the same thing is (might be) illegal? Does it cross the line when I explicitly agree with competitors that we'll all use the same algorithm? Or if we're all just independently using the popular pricing service could that become illegal? Or if the service agreement requires me to not rent for less than their algorithm calculates?
- 10000truths 3y ago
  What makes it collusion is the fact that others are using it as well, so the answer to your questions is yes. My understanding is that there's nothing wrong with building your own software that crawls public information and computes a price for you - the key thing is that it has to be your own, you can't distribute that software to others.

lifeisstillgood 3y ago

Wait. If landlords gather information about all other rents in the country, and then use that to set a price for their rents, that, cannot surely, be price fixing. So is the problem the “RENTmaximizer” software and other services that basically gather price information ? Because if perfect price information is available, and yet there is no competition in the market driving prices down, well, that’s rentier markets for you. There must be an economics PhD or two in that

chefandy 3y ago
From the blog post: Algorithms that recommend prices to numerous competing landlords threaten to remove renters’ ability to vote with their feet and comparison-shop for the best apartment deal around. From the brief: To participate in the service, landlords must share in “real-time” their “non-public,” “competitively sensitive” data, including actual rents paid, occupancy rates, and records of lease transactions. [Multifamily Compl. ¶¶ 227, 380.] RealPage then feeds “this data into a common algorithm.” [Student Compl. ¶ 5;] [Multifamily Compl. ¶ 380.] The common algorithm uses these common data for a single, common purpose: to generate “forward-looking, unit-specific pricing and supply recommendations” for all participating landlords. [Student Compl. ¶ 5.] To ensure that the landlords abide by these “recommendations,” RealPage puts significant “pressure” on them “to implement RealPage’s prices,” including by requiring clients to submit requests to deviate to the “corporate office” and tracking the “identity of the client’s staff that requested a deviation.” [Multifamily Compl. ¶¶ 17-20, 261-86.] As a result, landlords using RealPage adopt RealPage’s recommendations 80-90% of the time. [Id. ¶ 15.] The complaints allege that RealPage was clear about the purpose of its common pricing scheme: to increase prices above competitive levels through collaboration. Doesn't sound like the natural ebb and flow of the market to me.
- scrps 3y ago
  That sounds like a dark pool for the rental market.
  - kristjansson 3y ago

jhanschoo 3y ago

berniedurfee 3y ago
I was thinking the same thing. I had to double check that was an article on a .gov website. I think it’s refreshingly well written and accessible. Not an 800 page blob of legalese. Nice job to the authors.
Atheros 3y ago
Having adults give this a once-over would have been better. Does the law allow collusion online rather than IRL? This sentence implies that it does, otherwise the "IRL" is superfluous. Most (but not all) of us know, based on our knowledge and experience with zoomer writing, that the writer is not speaking literally or carefully. But this is a summary of a legal document and can be used in a court of law. This writing is terrible given the context. It's not the only example of bad writing. > And even if some of the conspirators cheat by starting with lower prices than those the algorithm recommended, that doesn’t necessarily change things. Being bad at breaking the law isn’t a defense. Breaking the law less or not at all is indeed a defense, possibly a successful one. It also doesn't constitute being "bad" at breaking the law. Lots of people who work in government agencies feel that it is okay to lie to the public to try to achieve greater goods. They are wrong.

miiiiiike 3y ago

I lived in a building that was owned by a hedge fund and used algorithmic pricing. It was frustrating to know the vacancy rate in the building, how desperate the sales people were for residents, and still be told that rent was going up hundreds of dollars a month because of demand in the region. Another thing they did was to offer lower rent if you moved into a unit that was vacant. They ”incentivized” people to move every year instead of just increasing the rent a reasonable amount. I’m talking rent going up $500-$1,000/month unless you moved into the identical unit next door. Most of the people in the build paid the increases but we were young so we moved. Our first year we lived in a small 1br. When the lease came up they wanted to increase our rent by $600/month. We opted to move into a huge 2br with limited light that had been vacant for a year or two. When our lease on that one came up they wanted to more than double our rent because there was such high demand for the unit. We were the demand.

scotty79 3y ago
I don't know how regulators can look at this number of vacancies and conclude that yes, the taxation on property with vaccancies is as high as it should be.
- lotsofpulp 3y ago
  Should be a formula that keeps increasing the tax liability per empty month, so eventually the owner has to dump it for zero or give it back to the government.
  - bluGill 3y ago
    You want a number of empty units in your city so that if you want to move there is a place to move to. No empty units means someone does without. You don't want too many empty units of course. some is needed. this price fixing is partially about units not even for rent which is a different problem you don't want. (but you want some units not for rent while they remodel)
- screenobobeano 3y ago
  I am really a proponent of the Chinese system. I’m a real estate investor and this “free market” isn’t going to last much longer since owning vacant homes will net you more than virtually anything else you could do legally. Real Estate is a free money machine, and it won’t stop until we adopt realistic government controlled system.

deleted 3y ago

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virtualwhys 3y ago

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Rapzid 3y ago
That's an interesting dynamic at play. I'm sure regulators around the world are working around the clock on figuring out how to deal with AirBnb lol.
deleted 3y ago
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dclowd9901 3y ago

There’s no other way around this but to shut down industries that provide this kind of service make it illegal to have automatic price setting.

HaukeHi 3y ago

Isn't Airbnb doing the same?

wolverine876 3y ago
How so? Is Airbnb colluding with competitors?
- aaomidi 3y ago
  I think Airbnb recommends a price to set your place to? I know there's also some external software that do that too. Based on the understanding of the post, I think both of those would be considered price colluding.
petesergeant 3y ago
No, because Airbnb is sharing market information with you, and is quite happy for you to undercut the market to drum up demand, or raise prices if you think you’ve got a winner, which keeps market efficiencies intact. What’s described in the article is a bunch of estate agents agreeing to use a price recommended by 3rd party software and minimize cheating on that price, which is price fixing.

jeffbee 3y ago

I don't get how this FTC position is compatible with the existence of things like commodity futures markets. A second point that bothers me about the blog post. It's immaterial to the brief, but the blog says the rent is up 20% since 2020, citing CPI-U. But it fails to account for increasing incomes. Median household incomes, nationwide, have kept pace with rents.

arming9513 3y ago
If income has raised by 20%, why should you expect rent to also increase by the same amount?
- jeffbee 3y ago
  Because it's a market operating point set by supply and demand. Increasing incomes support demand and raise prices.
  - Eisenstein 3y ago
    Why do increasing incomes support demand? I am not going to move to another place exactly the same just because I make more money. In order for prices to increase, I would have to be moving into a better place than I am in now, which means it would cost more anyway. Me moving laterally gives me no utility.
    - jeffbee 3y ago
      In the American rental market, for most lessees, the lessor can raise the price an arbitrary amount periodically. This is true for virtually all tenancies in this country.
      - Eisenstein 3y ago
        Sounds like that isn't a market force if they do it without demand changing.
  - 3y ago

xbar 3y ago

Maximum prison sentences, please.

buzer 3y ago

If this lawsuit is successful, would renters have standing to sue for damages? And how far would the liability go, just their landlord + RealPage (who is probably bankrupt by that point)? Or would everyone who colluded to keep prices high be liable, possibly even to renters whose landlord was not part of collusion but rents in the area increased due this?

advael 3y ago

I think the only reason this should be surprising is that we've let it be the status quo for so long, despite being pretty obviously illegal. Nonetheless it's good that the FTC has explicitly made a commitment to start enforcing the law

nerdponx 3y ago
It's nice when federal agencies are funded and led by people who aren't trying to sabotage them from the inside. Ignoring all other considerations, the current incumbent political party in the US presidency on average tends to produce effective & functioning federal agencies, and the other party on average tends to produce corrupt & dysfunctional federal agencies. I try to point this out frequently because voters tend to ignore this kind of thing until it affects them personally, or they read about some isolated grievance in the news. But it really should be considered a more important topic.
- staplers 3y ago
  voters tend to ignore this kind of thing until it affects them personally And when it finally becomes a problem that cannot be ignored, scapegoats will be found and used, even if they have to be invented in a fairy tale (internet conspiracy).
  - advael 3y ago
    Often it suffices to blame the agencies themselves, citing the very failures caused by mismanagement, corruption, and underfunding as evidence of the foolishness of using government agencies to do things. This in turn is the kind of nonsense you can get people to believe if you've systematically misinformed them while also convincing them they can't trust other sources, which is another well-known strategy of the same political faction
- gotoeleven 3y ago
  >and the other party on average tends to produce corrupt & dysfunctional federal agencies the federal agencies are mostly employees have been there through many administrations. How do they suddenly become corrupt and dysfunctional besides these employees (90% of the current incumbent political party) suddenly becoming corrupt and dysfunctional?

ummonk 3y ago

I don't understand how it's possible that every single biglaw firm offers the exact same starting salary but that isn't considered illegal collusion, while landlords using a market-estimation service as a starting point for pricing their units (but sometimes pricing below or above the algorithm's recommended price) is considered illegal collusion.

d0gsg0w00f 3y ago
Probably because legal defense outside of public defender is considered a luxury good. And it's rare to need a public defender if you're living a "normal" life. With housing, everybody has to live _somewhere_.
killingtime74 3y ago
(studied competition law in law school). Everyone having the same starting salary can be arrived at by non-illegal means, such as seeing what the others are offering and matching. To successfully prosecute for price fixing you need actual evidence of collusion. That is usually obtained by whistleblowing, as the first person usually gets a reduced sentence (example: https://www.accc.gov.au/media-release/cartel-immunity-policy-strengthened-whistleblowing-tool-launched https://www.accc.gov.au/media-release/cartel-immunity-policy...). Price fixing in buying/hiring is not monopoly btw, it's monopsony.
- aerhardt 3y ago
  Sorry to nitpick on this tangential detail, but what does “reduced sentence” entail? On paper it sounds like many people would rather take the secret to their graves.
  - killingtime74 3y ago
    It's not tangential at all. Depends on jurisdiction and policy by prosecuting authorities. Could be smaller fine, to complete immunity. I'm not familiar with American case law but I remember seeing that Matt Damon film "The Informant" that is based on a true story. The whistleblower (Matt Damon) was going to get complete immunity as he was the first to tell the FBI. https://en.wikipedia.org/wiki/Lysine_price-fixing_conspiracy https://en.wikipedia.org/wiki/Lysine_price-fixing_conspiracy. He ended up having his immunity rescinded for other reasons.

exabrial 3y ago

I'd like to see thousands of apartments hand back the increases to renters they illegally collected.

tz18 3y ago

Could this change how tech salaries are set? I know many companies base their salary grades on an algorithm that amounts to looking at what "comparable" companies are doing and aiming for the middle of that.

WirelessGigabit 3y ago
That would be nice. It's such an easy defense for companies to say: this is what the market pays.
silisili 3y ago
They're seemingly already doing that for benefits. I've had benefits reduced at two separate places 'because our research shows we were a little over for similar companies.' If that's not collusion, I don't know what is.
- cperciva 3y ago
  Collusion is if they, well, collude. Copying is not the same thing as colluding.
  - acuozzo 3y ago
    At some point copying does become tacit collusion, though.
    - willis936 3y ago
      No. Collusion requires agreement among the parties to not compete. Sure they copy but no one is forcing you to stay at the company or accept the new job offer. You walk to somewhere that does meet your ask or negotiate. It's collision when companies agree to not compete.
      - acuozzo 3y ago
        https://en.wikipedia.org/wiki/Tacit_collusion https://en.wikipedia.org/wiki/Tacit_collusion

trimethylpurine 3y ago

Lots of people are saying it's the same as doing it manually with public data. I don't think that's the issue. The article is explaining that the focus is the shared pricing database. Public information doesn't tell you if competitors will underprice to sink you, or if they are likely to hold a high price even against lower occupancy. This software tells you and your competitors whether or not to do that, and bases that guidance on its inside knowledge of its own customer base. That is what the FTC and DoJ are calling collusion, based on my reading of the article.

deleted 3y ago

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jml7c5 3y ago

As a renter myself, I have tremendous sympathy for the tenants affected by this. But there is a way to frame this whole saga that makes it much more innocuous: By maximizing individual profit, the software rapidly finds the real fair market value of rentals. It turns out that the fair market value for rentals is much higher than people thought! This should make sense: housing supply is low, housing demand is high, and housing demand is extremely inelastic. It is a situation where egregious profits should be expected! Landlords simply hadn't realized that they could charge more. There is one seemingly illogical result, which is that some units go vacant despite the huge demand. But unsold goods are a normal part price discovery, and we are not talking about a huge change: occupancy rates only drop a few percent. It's a brutal result for tenants, but the alternative is incorrect pricing, which has its own negative implications for the whole market.

Dylan16807 3y ago
> the software rapidly finds the real fair market value of rentals. That's cool and all but the price should be somewhere between the supplier cost and the purchaser value, not pegged at the top. > real fair market value Only if there's strong competition.
- jml7c5 3y ago
  >between the supplier cost and the purchaser value It is — it just turns out that the purchaser value is quite high!
  - Dylan16807 3y ago
    The value of not being homeless is extremely high. Which is an objectively bad price for housing.
willseth 3y ago
With price fixing, would-be competitors cooperate and function as a monopoly. That’s not a functioning market. These services act as a centralization point to accomplish the price fixing without colluding directly with each other. It’s actually much more efficient than traditional price fixing!

refurb 3y ago

One interesting things that Singapore does is that it collects and shares all rental data. When you lease a place to a tenant, there is a stamp duty ($100+) that the tenant pays. Then the landlord submits details about square footage, number of rooms, and the price it was rented at. Then the government shares the data in an aggregate manner: https://www.ura.gov.sg/Corporate/Property/Property-Data/Private-Residential-Properties https://www.ura.gov.sg/Corporate/Property/Property-Data/Priv...

hnburnsy 3y ago

>The Department of Justice has previously secured a guilty plea related to the use of pricing algorithms to fix prices in online resales. This is no idle threat. Be sure to click on that link and find out that in 2018 the FTC stopped the greedy corporate profiteers in the wall poster industry from price fixing back in 2013. Algorithmic price fixers beware.

hnburnsy 3y ago

Arizona AG sued RealPage and a number of apartment owners over this. The AG said RP covers 70% of the market. Complaint here... https://mcusercontent.com/cc1fad182b6d6f8b1e352e206/files/25cb1afd-70b3-f0e4-ac4b-4b63a06ee0e4/RealPage_Complaint.pdf https://mcusercontent.com/cc1fad182b6d6f8b1e352e206/files/25...

maerF0x0 3y ago

First off. I dont like collusion or rental pricing software that colludes across companies. However, now this means really big companies can use their own internal data to get advantages that littler players cannot. I also do not like laws that favor big companies over little ones. With the collusion software then littler companies could at least band together to get similar competitive effects that larger companies can. I'm open to discussion of how to resolve that though, any ideas?

willis936 3y ago
Simple: the big players will need to compete again. They can charge high rates but they will face high vacancy in the face of nearby housing units interested in low vacancy.
Jochim 3y ago
Kill the larger companies.
yardie 3y ago
Collusion is illegal. Period. Doesn’t matter if a big landlord or little landlord are doing it.
- maerF0x0 3y ago
  Yeah on further reflection and 24 hours to think on it. What I'm describing is covered by antitrust. Many players are not allowed to collude. If a player gets too big it faces antitrust / monopoly issues.

mizzao 3y ago

Is every FTC article usually written in this accessible and readable language?

gorgoiler 3y ago

Lots of tech companies use Ravio, Pave, etc to track the compensation their competitors are offering employees at similar levels. These tools plug straight into your payroll to give all the participants “live” market data. Isn’t this also price fixing?

rocqua 3y ago
Is it recommending salaries? The issue with the rent thing is that the algorithm sets a price, so collusion could easily be offloaded onto the algorithm. Something similar should also happen with salaries before this becomes a real problem right?
galdosdi 3y ago
If they have material nonpublic information about salaries and share it for the purpose of coordinating salaries, then yes, this is or should be illegal price fixing. They can solve the problem by making the data public, thus giving the same competitive negotiation advantage to the employee. The publicness is the key part -- it's price fixing when They trade information with Each Other, information that is unavailable to You and is essentially valuable to both sides in negotiating an employment offer

EchoReflection 3y ago

"rent is up nearly 20% since 2020" but is that taking into account the change in the value of the dollar and changes in the consumer price index? https://www.in2013dollars.com/us/inflation/2020?amount=1 https://www.in2013dollars.com/us/inflation/2020?amount=1 $1 in 2020 is equivalent in purchasing power to about $1.19 today, an increase of $0.19 over 4 years. The dollar had an average inflation rate of 4.48% per year between 2020 and today, producing a cumulative price increase of 19.17%. This means that today's prices are 1.19 times as high as average prices since 2020, according to the Bureau of Labor Statistics consumer price index. A dollar today only buys 84.034% of what it could buy back then. gas was $3.22 in 2020 but is 42.17% higher in 2024, so by that metric rent is proportionally lower (than the 20% increase in rent) Things changed rather dramatically, theoretically,because of different presidential puppet-string-pulling in terms of the FTC: https://www.skadden.com/insights/publications/2021/06/lina-khans-appointment-as-ftc-chair https://www.skadden.com/insights/publications/2021/06/lina-k... https://www.bbc.com/news/world-us-canada-55738746 https://www.bbc.com/news/world-us-canada-55738746 After less than 24 hours in office Biden signed 15 executive orders whereas Trump had signed 8 after two weeks (Obama had signed 9 after two weeks). https://www.bbc.com/news/world-us-canada-55738746 https://www.bbc.com/news/world-us-canada-55738746 information that comes from government agencies is almost always data that has been arranged in such a way as to make those in power look like they're the good guys.

isthatafact 3y ago
Considering that rent is around a one third contribution to US inflation measuremnt (which is done by some indirect estimation), I would also ask how much inflation that software caused by essentially a feedback loop.

SergeAx 3y ago

Is there a way to keep rent prices in check without strong market regulations? Every business will do everything legal to max out the profit, this is a nature of business. Freezing prices in some places will only rise it everywhere around. Building more is not an answer: most large cities has no adequate lots for new buildings, and where they do - it is undeveloped areas, where no one wants to live. We thought that cars is answer, but cars only deferred the market saturation, plus we need more roads and parkings. Remote work may be an answer, but people still need schools, shops and restaurants.

globalnode 3y ago

these services are a form of collusion that basically bypass normal supply and demand and are effectively anti-free market. i can see it being ok if all the properties were owned by one person (which they aren't) but then the gov't would be within its rights to go break it up as an unfair monopoly. which i might add, is a monopoly on a basic human need for shelter. a right even? this is corrupt greed at its worst, market manipulation at best.

pipes 3y ago

Price fixing is when two or more land lords agree to not lower their prices beyond a certain point. There is no agreement here. I don't see how this is price fixing.

rsaxvc 3y ago
You could review their argument: https://www.ftc.gov/system/files/ftc_gov/pdf/YardiSOI-filed%28withattachments%29_0.pdf https://www.ftc.gov/system/files/ftc_gov/pdf/YardiSOI-filed%... Search for "adherence to the agreed-upon Prices", "fix list price", and "Express delegation". They argue that collusion through delegation counts as price fixing. They argue colluding to set list prices even when there isn't a price floor is price fixing. They argue that replacing the delegation with an algorithm is still price fixing. Most of their arguments are based on already settled cases.
yunwal 3y ago
In this case, it's price fixing because two or more landlords are agreeing to not lower their prices beyond a certain point.

koliber 3y ago

This is a case of information asymmetry being used as an additional advantage by property managers. The software cited, RENTMaximizer, offers aggregate price information for property managers with the aim of maximizing prices. Would a RENTMinimizer product, given away for free to tenants, help? It would show aggregate rents that tenants pay, including minimum ones, with the hope that they can use this information for more confidence when negotiating rents.

harvey9 3y ago
No, it is an agreement between suppliers to set prices. Per TFA, one of the goals is to prevent property managers from negotiating with tenants.

renewiltord 3y ago

That seems obvious. Otherwise my Cartel LLC can just provide price-fixing software that you can white box to bypass anti-price-fixing laws.

madsbuch 3y ago

Tangential to this: In Norway and Denmark (as the only countries AFAIK) there are laws stating that a unit needs to have inhabitants. Ie. it can not sit still on the market. If the owner does not live there, he has to rent it out. It baffles me, that this is not a general rule as it forces fair market prices for a illiquid supply (it takes time to build new housing, if it is even possible). In this case you'd just complain that a company keeps units vacant to the municipality who would fine the company until it is brought in order.

distances 3y ago
Berlin has similar legislation. I doubt there's much enforcement about it, I would imagine that someone has to file a complaint or something before anything happens for an empty flat.
amsterdorn 3y ago
Would be a highly effective way to increase housing supply, but this would favor people over govt/big firms & that doesn't happen in the US (sadly).
dublinben 3y ago
Despite what is going on with this rent price collusion situation, the problem that high priced cities face is far too few vacant apartments not too many. The vacancy rate in some places is as low as 1-2%, which is much lower than it should be.
- madsbuch 3y ago
  Oh yes, I completely agree. These are also issues in both Oslo and Copenhagen. But having rules like this removes some speculation.

c0balt 3y ago

> [..] a brief filed by the FTC and the Department of Justice offers a helpful guideline for antitrust compliance: your algorithm can’t do anything that would be illegal if done by a real person. That one weird trick that doesn't work well under the law.

xattt 3y ago
Has this defence worked for people caught up in copyright infringement lawsuits who claim that an infringing torrent download was initiated by something like Sonarr/Radarr?

dmitrygr 3y ago

since when did the FTC switch to SMS-speak? > Such software can allow landlords to collude on pricing by using an algorithm—something the law doesn’t allow IRL. "IRL"?

tqi 3y ago

Mercer is an 80 year old, 25K employee "consulting" firm that makes over $2B per year primarily by providing human resources consulting, ie helping firms set salaries. Why is that not considered price fixing, under the same collusion rationale?

soerxpso 3y ago
It would probably be relevant that Mercer doesn't ever say, "Don't hire anyone for this position if you can't get someone willing to do it for the market price." (I'm assuming they don't.) You can advise people on how to set the prices of things, and you can advise a lot of people at the same time, you just can't advise them to participate in what essentially amounts to reverse collective bargaining.
- tqi 3y ago
  I'm honestly still not clear on the distinction. > Agreeing to use an algorithm is an agreement. In algorithmic collusion, a pricing algorithm combines competitor data and spits out the suggested “maximized” rent for a unit given local conditions. This sounds exactly like what a compensation consultant does (collect competitor data, including data from other clients, and suggest a comp range)?

parentheses 3y ago

I feel this is a good way to think of regulating AI. Think of the AI as a person and apply law accordingly.

sara44444444 3y ago

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