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Serious question: Would it be illegal to hire a human "price consultant" who was very popular among your landlord friends? Does it matter if the price consulta

Serious question: Would it be illegal to hire a human "price consultant" who was very popular among your landlord friends? Does it matter if the price consultant only serves 5% of the landlords in an area? What if they serve 20%? 50%? Where does the line get drawn between "seeking advice from an expert" and "engaging in price-fixing"? I wouldn't be surprised if that was tried at some point in the past, so there might already be legal precedent for the non-algorithmic variant of this. > Regulation will absolutely hurt middle-class landlords but will increase the average sophistication of the industry. Sophistication is a tool used deliberately and maliciously by large incumbents to suppress competition and to crush smaller firms. And I'm not convinced that middle-class landlords who own a handful of units are the big bad guy we should be going after here. I can only hope that the FTC agrees and is willing to focus their attention to where it will actually help people.

tsimionescu 3y ago
> Would it be illegal to hire a human "price consultant" who was very popular among your landlord friends? Does it matter if the price consultant only serves 5% of the landlords in an area? What if they serve 20%? 50%? Where does the line get drawn between "seeking advice from an expert" and "engaging in price-fixing"? The answer is most likely that it would be illegal, yes, at least if your friends are offering properties in the same area. Even discussing pricing decisions with your friends is likely illegal. Imagine it like this: Coca Cola and Pepsi executives are not going to meet for brunch and casually start discussing what margins they think are reasonable and how they set pricing in different markets and how low they are willing to go with their price. These are some of the most closely guarded secrets of a company. Decision makers who are aware of these aren't even easily allowed to leave one company and join the other, because of the risks of leaking this information. And if they do discuss this things, they would easily be seen as guilty of collusion to fix prices. The fact that two landlords who happen to be friends are not the CEOs of multi-billion dollar companies doesn't fundamentally change the law. You are not allowed to discuss pricing decisions with your competitors. If you want to collobrate, you need to incorporate and pool your resources into a common enterprise. And you can hire a price consultant, but that price consultant can't be working for other landlords in the same area. You could hire different consultants from the same firm, but the firm would have to be very careful to ensure that the consultants don't discuss their clients with each other in any way.
- AnthonyMouse 3y ago
  > These are some of the most closely guarded secrets of a company. This seems like a weird argument. For some companies their pricing is super secret because it's often negotiated and they don't want Customer A to know that Customer B is getting a bigger discount, and if a competitor knew Customer A was overpaying they'd send them an offer. But for others the price is just the price. Nobody is going to Walmart to haggle. All of Walmart's competitors know exactly what Walmart's customers are paying because it's written right there on the sign. So how could it be illegal to tell them?
  - tsimionescu 3y ago
    That's not what I mean by pricing decisions. You of course know how much Walmart asks for tomatoes. What you don't know, and is a closely guarded secret, is how Walmart arrived at that price. Is the current price close to their minimum possible, and would they remove tomatoes from the shelves rather than drop this price if the demand wasn't high enough? Are they expecting to increase it or decrease it in the next six months? And this information is important, because if Whole Foods knew it, they could either (a) try to undercut Walmart to steal their customers, but also could (b) safely increase their price knowing that Walmart plans to do the same, and so not fear losing tomato customers to Walmart. In contrast, landlords working with RealPage know that at least a large percentage of other landlords follow the exact same pricing strategy, and thus be secure that, if they also refuse to lower prices as the algorithm is recommending, they won't lose tenants to other landlords. Of course, some of them might chose option (a), undercutting all the others, but that's not a real problem in a cartel with so many small members (one cheating member won't significantly affect prices). So, it's not illegal to say "you know, Walmart charges 2$ for a tomato". But it is illegal to say "you know, I'm in talks with Walmart to convince them to charge 2.5$ per tomato starting tomorrow".
    - AnthonyMouse 3y ago
      > What you don't know, and is a closely guarded secret, is how Walmart arrived at that price. This is often not that much of a secret either. In many cases it's as simple as: Look at what competitors are charging, set your price the same or slightly lower, and if that price isn't profitable then don't carry it. Which is why concentrated markets are basically as bad as a monopoly. If all you have is Walmart and Whole Foods then Walmart can raise prices, Whole Foods sees this and raises theirs too, and then they both leave it there because that's better for both of them than the lower price. Doubling their margins is more profitable than increasing their market share from 50% to 75%. Tripling their sales isn't on the table because they each started with 50% and you can't have 150% of the market. Whereas if there are a hundred stores, even if 80 of them try to match Walmart's price increase, 20 of them notice that they now can triple their sales or more by keeping the lower price, and that's more profitable than doubling their margins. At which point others get tired of losing most of their sales and lower their prices again. And the latter is the kind of market Walmart actually operates in, which is why their marketing slogan is "low prices" and not "it's for your own good". > Of course, some of them might chose option (a), undercutting all the others, but that's not a real problem in a cartel with so many small members (one cheating member won't significantly affect prices). That's exactly when it's a problem, because they all have the same incentive: Let the members of the cartel increase the market price by withholding their units, while renting out all of yours. And then it's not just one landlord doing it because the only ones not doing it are "selfless" idiots who could be making more money by defecting against the cartel.

tsimionescu 3y ago

> Would it be illegal to hire a human "price consultant" who was very popular among your landlord friends? Does it matter if the price consultant only serves 5% of the landlords in an area? What if they serve 20%? 50%? Where does the line get drawn between "seeking advice from an expert" and "engaging in price-fixing"? The answer is most likely that it would be illegal, yes, at least if your friends are offering properties in the same area. Even discussing pricing decisions with your friends is likely illegal. Imagine it like this: Coca Cola and Pepsi executives are not going to meet for brunch and casually start discussing what margins they think are reasonable and how they set pricing in different markets and how low they are willing to go with their price. These are some of the most closely guarded secrets of a company. Decision makers who are aware of these aren't even easily allowed to leave one company and join the other, because of the risks of leaking this information. And if they do discuss this things, they would easily be seen as guilty of collusion to fix prices. The fact that two landlords who happen to be friends are not the CEOs of multi-billion dollar companies doesn't fundamentally change the law. You are not allowed to discuss pricing decisions with your competitors. If you want to collobrate, you need to incorporate and pool your resources into a common enterprise. And you can hire a price consultant, but that price consultant can't be working for other landlords in the same area. You could hire different consultants from the same firm, but the firm would have to be very careful to ensure that the consultants don't discuss their clients with each other in any way.

AnthonyMouse 3y ago
> These are some of the most closely guarded secrets of a company. This seems like a weird argument. For some companies their pricing is super secret because it's often negotiated and they don't want Customer A to know that Customer B is getting a bigger discount, and if a competitor knew Customer A was overpaying they'd send them an offer. But for others the price is just the price. Nobody is going to Walmart to haggle. All of Walmart's competitors know exactly what Walmart's customers are paying because it's written right there on the sign. So how could it be illegal to tell them?
- tsimionescu 3y ago
  That's not what I mean by pricing decisions. You of course know how much Walmart asks for tomatoes. What you don't know, and is a closely guarded secret, is how Walmart arrived at that price. Is the current price close to their minimum possible, and would they remove tomatoes from the shelves rather than drop this price if the demand wasn't high enough? Are they expecting to increase it or decrease it in the next six months? And this information is important, because if Whole Foods knew it, they could either (a) try to undercut Walmart to steal their customers, but also could (b) safely increase their price knowing that Walmart plans to do the same, and so not fear losing tomato customers to Walmart. In contrast, landlords working with RealPage know that at least a large percentage of other landlords follow the exact same pricing strategy, and thus be secure that, if they also refuse to lower prices as the algorithm is recommending, they won't lose tenants to other landlords. Of course, some of them might chose option (a), undercutting all the others, but that's not a real problem in a cartel with so many small members (one cheating member won't significantly affect prices). So, it's not illegal to say "you know, Walmart charges 2$ for a tomato". But it is illegal to say "you know, I'm in talks with Walmart to convince them to charge 2.5$ per tomato starting tomorrow".
  - AnthonyMouse 3y ago
    > What you don't know, and is a closely guarded secret, is how Walmart arrived at that price. This is often not that much of a secret either. In many cases it's as simple as: Look at what competitors are charging, set your price the same or slightly lower, and if that price isn't profitable then don't carry it. Which is why concentrated markets are basically as bad as a monopoly. If all you have is Walmart and Whole Foods then Walmart can raise prices, Whole Foods sees this and raises theirs too, and then they both leave it there because that's better for both of them than the lower price. Doubling their margins is more profitable than increasing their market share from 50% to 75%. Tripling their sales isn't on the table because they each started with 50% and you can't have 150% of the market. Whereas if there are a hundred stores, even if 80 of them try to match Walmart's price increase, 20 of them notice that they now can triple their sales or more by keeping the lower price, and that's more profitable than doubling their margins. At which point others get tired of losing most of their sales and lower their prices again. And the latter is the kind of market Walmart actually operates in, which is why their marketing slogan is "low prices" and not "it's for your own good". > Of course, some of them might chose option (a), undercutting all the others, but that's not a real problem in a cartel with so many small members (one cheating member won't significantly affect prices). That's exactly when it's a problem, because they all have the same incentive: Let the members of the cartel increase the market price by withholding their units, while renting out all of yours. And then it's not just one landlord doing it because the only ones not doing it are "selfless" idiots who could be making more money by defecting against the cartel.