5 ms·

Justice dept. requires RealPage end sharing competitively sensitive information

68 points by phkahler 11mo ago

nothercastle 11mo ago
They might not share info but they will regenerate identical suggestions from market data for ask customers effectively price fixing without clear collusion
- gruez 11mo ago
  Is that "price collusion" though? How's that different than if you're selling stuff on cragislist/facebook marketplace/ebay, and you set your price by looking what other listings are?
  - roxolotl 11mo ago
    The difference is that’s an open market. When rents change off market, going up at the end of the year for example, that information isn’t available to market participants.
    - gruez 11mo ago
      >The difference is that’s an open market. When rents change off market, going up at the end of the year for example, that information isn’t available to market participants. 1. How is this any different than other sorts of transactions that occur on a recurring basis? For instance dog walking services or personal trainers? Such vendors are also presumably pricing their services based on what everyone else's pricing is, but any subsequent price changes aren't public. 2. Under current competition law, whether something is an "open market" is irrelevant to whether a given pricing strategy is illegal or not. Collusion doesn't magically become legal because it's done on the open market.
  - bootlooped 11mo ago
    When I'm selling something used, and I look at prices for other listings, I'm competing with them. I want to have a price that is attractive, given the landscape. I'm not messaging all the other sellers and suggesting we all raise prices by 10%, or having an algorithm run by a third party service do that indirectly. RealPage made it so that landlords were less competitive and more cooperative. Landlords would share proprietary information and then RealPage would help them all set prices collectively. It's just old fashioned price fixing with a SaaS and an algorithm. So the difference is using pricing info to beat your competitors vs using pricing info to collude with your competitors.
    - jasode 11mo ago
      >I'm not messaging all the other sellers and suggesting we all raise prices by 10%, The way competitors legally message each other to suggest a price increase is via the prices themselves. E.g. an airline wants to raise the price of a ticket from New York to Los Angeles from $500 to $530 -- and they secretly want the other airlines to follow them and raise their prices too. 1) The airline submits the price increase to the global travel reservation system that all airlines can see. All the other airlines have computers constantly monitoring all the other airlines' ticket prices and can instantly adjust prices in response. 2) The airline that wants the price increase waits to see how the other airlines respond. Either (1) the competitor airlines keeps their lower prices to "take market share" -- or -- (2) they also raise their prices to match which "maintains status quo of market share" but all competitors get to take advantage of charging the higher price 3) If the other airlines don't match the higher price, the airline that "proposed" the higher price then rolls it back to $500. All this can happen within a few hours. That's the way competitors "collude" to raise prices out in the open. The publicly visible prices are the messaging system. The loophole here is that the changing prices must be visible because the potential passengers buying the tickets need to see them too. The above scenario has been studied by various papers and the government. The prices simultaneously act as both a "cost to buy" and as a "message to cooperate". Legal "collusion" via price signals is easier in concentrated industries with few competitors (e.g. airlines). It's harder for fragmented markets or markets with hundreds-to-thousands of competitors. E.g. a barbershop wanting to raise the price of haircuts by $5 isn't going to get the hundred other barbershops to also raise their prices by $5.
  - paxys 11mo ago
    If landlords want to just look at other public listings and adjust their own prices in response (which is completely legal to do) then why does a service like Realpage exist?
    - tptacek 11mo ago
      ... isn't that what Realpage does?
      - paxys 11mo ago
        No it isn't. Companies making individual decisions about pricing is legal. Companies asking an external source (e.g. a consulting company) to help with pricing is legal. Companies sharing nonpublic data with their competitors and setting prices collectively as a group is illegal. The entire reason for Realpage's existence is to facilitate #3.
        tptacek 11mo ago
        Wait, your #3 appears to combine multiple factors. Is it "sharing nonpublic data" that's the problem or is it "setting prices collectively" that's a problem? Those aren't the same thing. Price-setting implies a commitment not to outbid counterparties.
        paxys 11mo ago
        They are both illegal, and realpage does both. Literally from the linked DoJ press release > RealPage’s revenue management software has relied on nonpublic, competitively sensitive information shared by landlords to set rental prices. RealPage’s software has also included features designed to limit rental price decreases and otherwise align pricing among competitors.
        tptacek 11mo ago
        The sentence you quote says Realpage used nonpublic information to facilitate the setting of prices, but does not say that the sharing of nonpublic information is itself price setting. You can do lots of things to set prices; the key feature again is a commitment against defection. I'm not sticking up for Realpage; I don't know enough about how it works.
  - array_key_first 11mo ago
    You don't go to those other people and tell them what they should set their price as. RealPage does, that's the business model. If enough real estate operators use RealPage, RealPage could arbitrary suggest a 100x price hike and it would be competitive.
- m463 11mo ago
  I can't help but think of parallel reconstruction.
empath75 11mo ago
I think this is good, but I doubt it'll actually impact rental prices as much as people think, because the problem is fundamentally a housing shortage.
- novia 11mo ago
  The problem is fundamentally a housing shortage AND RealPage recommended to large rental operators that they leave apartments empty. So they definitely did actually pour gasoline on the fire.
  - jeffbee 11mo ago
    Landlords are completely capable of leaving units vacant all by themselves and there isn't any evidence that realpage clients were more likely to do that.
    - novia 11mo ago
      My source was this article which broke the RealPage story three years ago: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r... > 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. ... > Apartment managers can reject the software’s suggestions, but as many as 90% are adopted, according to former RealPage employees.
      - jeffbee 11mo ago
        Yeah I mean I don't know how to tell you this but that's not a source. Rental managers leave units vacant all the time, hoping for an unrealistic price. It's certainly possible and even consistent with those claims that realpage clients were no worse than general property managers in this regard. They may have even been more willing to accept lower prices based on the realpage recommendations.
ImPostingOnHN 11mo ago
There seems to be nothing preventing YieldStar's actual business model: 1. Pick a rental rate. This can be based on public data, nonpublic data, or totally made-up. 2. "Strongly encourage" your users/customers to use the rate you picked. 3. 90% of your users/customers agree (historically speaking), legal collusion achieved.
- Muromec 11mo ago
  That's the rent controls that communists were supposed to bring, right? It just needs a cuty hall setting a celling on yearly increases
  - immibis 11mo ago
    I don't think HN users understood the sarcasm.
- gruez 11mo ago
  >2. "Strongly encourage" your users/customers to use the rate you picked. That's what got them whacked in the DOJ investigation/indictment though?
- paxys 11mo ago
  RTFA. The settlement prevents all of these. Can't use nonpublic data in their models. Can't look at active leases. Can't run surveys to collect data. Can't suggest pricing narrower than at the state level. Can't align pricing among different users. Can't have features that discourage decreasing prices.
  - deleted 11mo ago
    [deleted]
jeffbee 11mo ago
I think it's a positive step for American housing market to slowly check off the list of pointless non-solutions so that we can finally arrive at the conclusion that the only way out of the crisis is to build housing. We're just following the San Francisco process here. Ban realpage. Tax vacancies. Complain about foreign investors. Put a tax on "mansions" that's actually a tax on apartment buildings. We will slowly, slowly check off all the boxes of the pointless things. Then 50 years later we can start building houses.
- School-Cotton 11mo ago
  You skipped “ban Airbnbs” as NYC did (to no effect other than making it more difficult for people who live there to have friends come visit them).
  - jeffbee 11mo ago
    Right, the list of counterproductive things we already tried is too long to write down in this little box. Thanks for the reminder, though.
  - tclancy 11mo ago
    Yes, no one ever visited NYC before AirBnB. And you’re ignoring a boatload of negative externalities, but that’s the glory of our current economic setup, isn’t it?
    - School-Cotton 11mo ago
      I didn't say "impossible", I said "more difficult".
      - immibis 11mo ago
        Well that makes sense doesn't it? Shortage of X, but we don't want it to be expensive -> add some non-monetary costs of acquiring X. Queues on the iPhone release day, for example - the price of the phone is not just the money you pay, but also all the time you spend waiting in line.
neilv 11mo ago
Am I missing something, or is RealPage tentatively being given a pass on illegal price-fixing and all the harm that's caused to numerous people?
- kevin_thibedeau 11mo ago
  Follow the money.
SilverElfin 11mo ago
Do Redfin and Zillow’s suggested home prices basically do the same thing? What crosses the line into price fixing or monopolistic collusion?
- tptacek 11mo ago
  I wonder the same thing. The essence of a collusion scheme is a commitment between counterparties not to defect. Pure information is insufficient to create such a commitment. There are other ways to distort markets besides collusion, and maybe Realpage does one of them?
  - cycomanic 11mo ago
    > I wonder the same thing. The essence of a collusion scheme is a commitment between counterparties not to defect. Do you have any citation that supports that? That seems an awfully narrow definition.
    - tptacek 11mo ago
      Sure: just google ["price fixing" "jury instructions"] (this is a cheat code for a lot of legal arguments on HN). You'll get a lot of them!
  - trevwilson 11mo ago
    Part of the complaint is that RealPage actively discourages defection > While some landlords might achieve higher profits by setting lower prices than recommended by the algorithm, it appears RealPage takes extensive measures to prevent such behavior. As alleged in the DOJ complaint, RealPage pushes its software users to turn on the auto-accept setting so that price recommendations are automatically accepted. The complaint also alleges that the process of rejecting a price recommendation can be onerous. For instance, in order to reject a recommendation from AIRM software, users must provide a “business” reason for doing so, and they must do so separately for each floorplan in the building. When it is costly for software users to override algorithmic recommendations, supracompetitive prices—prices above what would occur under normal competition—can be sustained. https://bidenwhitehouse.archives.gov/cea/written-materials/2024/12/17/the-cost-of-anticompetitive-pricing-algorithms-in-rental-housing/ https://bidenwhitehouse.archives.gov/cea/written-materials/2... And the full complaint: https://www.justice.gov/archives/opa/media/1364976/dl https://www.justice.gov/archives/opa/media/1364976/dl
fn-mote 11mo ago
I agree with many comments here, but one of the terms seems absurd: > Not use models that determine geographic effects narrower than at a state level They are forbidden from having different models for different cities?? This seems extreme to me. Any background on this?
underlipton 11mo ago
So, unfortunately, even in the best case scenario, the damage is already done. There's already far too much of the economy built on top of the inflated rents and property valuations. The only way to fix things is straight-up deflation. Which will obviously be very painful. https://www.youtube.com/watch?v=Kbztr5FDZtg https://www.youtube.com/watch?v=Kbztr5FDZtg
- altairprime 11mo ago
  If you hand the Fed a lever to tax corporate revenue less wages paid to the 80% lowest paid workers (and exempt all other deductions) for such situations, it lets them create inflationary pressure on worker wages and deflationary pressure on pricing, which would cure the rent market within a few years at best.

68 points by phkahler 11mo ago

They might not share info but they will regenerate identical suggestions from market data for ask customers effectively price fixing without clear collusion

gruez 11mo ago
Is that "price collusion" though? How's that different than if you're selling stuff on cragislist/facebook marketplace/ebay, and you set your price by looking what other listings are?
- roxolotl 11mo ago
  The difference is that’s an open market. When rents change off market, going up at the end of the year for example, that information isn’t available to market participants.
  - gruez 11mo ago
    >The difference is that’s an open market. When rents change off market, going up at the end of the year for example, that information isn’t available to market participants. 1. How is this any different than other sorts of transactions that occur on a recurring basis? For instance dog walking services or personal trainers? Such vendors are also presumably pricing their services based on what everyone else's pricing is, but any subsequent price changes aren't public. 2. Under current competition law, whether something is an "open market" is irrelevant to whether a given pricing strategy is illegal or not. Collusion doesn't magically become legal because it's done on the open market.
- bootlooped 11mo ago
  When I'm selling something used, and I look at prices for other listings, I'm competing with them. I want to have a price that is attractive, given the landscape. I'm not messaging all the other sellers and suggesting we all raise prices by 10%, or having an algorithm run by a third party service do that indirectly. RealPage made it so that landlords were less competitive and more cooperative. Landlords would share proprietary information and then RealPage would help them all set prices collectively. It's just old fashioned price fixing with a SaaS and an algorithm. So the difference is using pricing info to beat your competitors vs using pricing info to collude with your competitors.
  - jasode 11mo ago
    >I'm not messaging all the other sellers and suggesting we all raise prices by 10%, The way competitors legally message each other to suggest a price increase is via the prices themselves. E.g. an airline wants to raise the price of a ticket from New York to Los Angeles from $500 to $530 -- and they secretly want the other airlines to follow them and raise their prices too. 1) The airline submits the price increase to the global travel reservation system that all airlines can see. All the other airlines have computers constantly monitoring all the other airlines' ticket prices and can instantly adjust prices in response. 2) The airline that wants the price increase waits to see how the other airlines respond. Either (1) the competitor airlines keeps their lower prices to "take market share" -- or -- (2) they also raise their prices to match which "maintains status quo of market share" but all competitors get to take advantage of charging the higher price 3) If the other airlines don't match the higher price, the airline that "proposed" the higher price then rolls it back to $500. All this can happen within a few hours. That's the way competitors "collude" to raise prices out in the open. The publicly visible prices are the messaging system. The loophole here is that the changing prices must be visible because the potential passengers buying the tickets need to see them too. The above scenario has been studied by various papers and the government. The prices simultaneously act as both a "cost to buy" and as a "message to cooperate". Legal "collusion" via price signals is easier in concentrated industries with few competitors (e.g. airlines). It's harder for fragmented markets or markets with hundreds-to-thousands of competitors. E.g. a barbershop wanting to raise the price of haircuts by $5 isn't going to get the hundred other barbershops to also raise their prices by $5.
- paxys 11mo ago
  If landlords want to just look at other public listings and adjust their own prices in response (which is completely legal to do) then why does a service like Realpage exist?
  - tptacek 11mo ago
    ... isn't that what Realpage does?
    - paxys 11mo ago
      No it isn't. Companies making individual decisions about pricing is legal. Companies asking an external source (e.g. a consulting company) to help with pricing is legal. Companies sharing nonpublic data with their competitors and setting prices collectively as a group is illegal. The entire reason for Realpage's existence is to facilitate #3.
      - tptacek 11mo ago
        Wait, your #3 appears to combine multiple factors. Is it "sharing nonpublic data" that's the problem or is it "setting prices collectively" that's a problem? Those aren't the same thing. Price-setting implies a commitment not to outbid counterparties.
        paxys 11mo ago
        They are both illegal, and realpage does both. Literally from the linked DoJ press release > RealPage’s revenue management software has relied on nonpublic, competitively sensitive information shared by landlords to set rental prices. RealPage’s software has also included features designed to limit rental price decreases and otherwise align pricing among competitors.
        tptacek 11mo ago
        The sentence you quote says Realpage used nonpublic information to facilitate the setting of prices, but does not say that the sharing of nonpublic information is itself price setting. You can do lots of things to set prices; the key feature again is a commitment against defection. I'm not sticking up for Realpage; I don't know enough about how it works.
- array_key_first 11mo ago
  You don't go to those other people and tell them what they should set their price as. RealPage does, that's the business model. If enough real estate operators use RealPage, RealPage could arbitrary suggest a 100x price hike and it would be competitive.
m463 11mo ago
I can't help but think of parallel reconstruction.

empath75 11mo ago

I think this is good, but I doubt it'll actually impact rental prices as much as people think, because the problem is fundamentally a housing shortage.

novia 11mo ago
The problem is fundamentally a housing shortage AND RealPage recommended to large rental operators that they leave apartments empty. So they definitely did actually pour gasoline on the fire.
- jeffbee 11mo ago
  Landlords are completely capable of leaving units vacant all by themselves and there isn't any evidence that realpage clients were more likely to do that.
  - novia 11mo ago
    My source was this article which broke the RealPage story three years ago: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r... > 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. ... > Apartment managers can reject the software’s suggestions, but as many as 90% are adopted, according to former RealPage employees.
    - jeffbee 11mo ago
      Yeah I mean I don't know how to tell you this but that's not a source. Rental managers leave units vacant all the time, hoping for an unrealistic price. It's certainly possible and even consistent with those claims that realpage clients were no worse than general property managers in this regard. They may have even been more willing to accept lower prices based on the realpage recommendations.

ImPostingOnHN 11mo ago

There seems to be nothing preventing YieldStar's actual business model: 1. Pick a rental rate. This can be based on public data, nonpublic data, or totally made-up. 2. "Strongly encourage" your users/customers to use the rate you picked. 3. 90% of your users/customers agree (historically speaking), legal collusion achieved.

Muromec 11mo ago
That's the rent controls that communists were supposed to bring, right? It just needs a cuty hall setting a celling on yearly increases
- immibis 11mo ago
  I don't think HN users understood the sarcasm.
gruez 11mo ago
>2. "Strongly encourage" your users/customers to use the rate you picked. That's what got them whacked in the DOJ investigation/indictment though?
paxys 11mo ago
RTFA. The settlement prevents all of these. Can't use nonpublic data in their models. Can't look at active leases. Can't run surveys to collect data. Can't suggest pricing narrower than at the state level. Can't align pricing among different users. Can't have features that discourage decreasing prices.
- deleted 11mo ago
  [deleted]

jeffbee 11mo ago

I think it's a positive step for American housing market to slowly check off the list of pointless non-solutions so that we can finally arrive at the conclusion that the only way out of the crisis is to build housing. We're just following the San Francisco process here. Ban realpage. Tax vacancies. Complain about foreign investors. Put a tax on "mansions" that's actually a tax on apartment buildings. We will slowly, slowly check off all the boxes of the pointless things. Then 50 years later we can start building houses.

School-Cotton 11mo ago
You skipped “ban Airbnbs” as NYC did (to no effect other than making it more difficult for people who live there to have friends come visit them).
- jeffbee 11mo ago
  Right, the list of counterproductive things we already tried is too long to write down in this little box. Thanks for the reminder, though.
- tclancy 11mo ago
  Yes, no one ever visited NYC before AirBnB. And you’re ignoring a boatload of negative externalities, but that’s the glory of our current economic setup, isn’t it?
  - School-Cotton 11mo ago
    I didn't say "impossible", I said "more difficult".
    - immibis 11mo ago
      Well that makes sense doesn't it? Shortage of X, but we don't want it to be expensive -> add some non-monetary costs of acquiring X. Queues on the iPhone release day, for example - the price of the phone is not just the money you pay, but also all the time you spend waiting in line.

neilv 11mo ago

Am I missing something, or is RealPage tentatively being given a pass on illegal price-fixing and all the harm that's caused to numerous people?

kevin_thibedeau 11mo ago
Follow the money.

SilverElfin 11mo ago

Do Redfin and Zillow’s suggested home prices basically do the same thing? What crosses the line into price fixing or monopolistic collusion?

tptacek 11mo ago
I wonder the same thing. The essence of a collusion scheme is a commitment between counterparties not to defect. Pure information is insufficient to create such a commitment. There are other ways to distort markets besides collusion, and maybe Realpage does one of them?
- cycomanic 11mo ago
  > I wonder the same thing. The essence of a collusion scheme is a commitment between counterparties not to defect. Do you have any citation that supports that? That seems an awfully narrow definition.
  - tptacek 11mo ago
    Sure: just google ["price fixing" "jury instructions"] (this is a cheat code for a lot of legal arguments on HN). You'll get a lot of them!
- trevwilson 11mo ago
  Part of the complaint is that RealPage actively discourages defection > While some landlords might achieve higher profits by setting lower prices than recommended by the algorithm, it appears RealPage takes extensive measures to prevent such behavior. As alleged in the DOJ complaint, RealPage pushes its software users to turn on the auto-accept setting so that price recommendations are automatically accepted. The complaint also alleges that the process of rejecting a price recommendation can be onerous. For instance, in order to reject a recommendation from AIRM software, users must provide a “business” reason for doing so, and they must do so separately for each floorplan in the building. When it is costly for software users to override algorithmic recommendations, supracompetitive prices—prices above what would occur under normal competition—can be sustained. https://bidenwhitehouse.archives.gov/cea/written-materials/2024/12/17/the-cost-of-anticompetitive-pricing-algorithms-in-rental-housing/ https://bidenwhitehouse.archives.gov/cea/written-materials/2... And the full complaint: https://www.justice.gov/archives/opa/media/1364976/dl https://www.justice.gov/archives/opa/media/1364976/dl

fn-mote 11mo ago

I agree with many comments here, but one of the terms seems absurd: > Not use models that determine geographic effects narrower than at a state level They are forbidden from having different models for different cities?? This seems extreme to me. Any background on this?

underlipton 11mo ago

So, unfortunately, even in the best case scenario, the damage is already done. There's already far too much of the economy built on top of the inflated rents and property valuations. The only way to fix things is straight-up deflation. Which will obviously be very painful. https://www.youtube.com/watch?v=Kbztr5FDZtg https://www.youtube.com/watch?v=Kbztr5FDZtg

altairprime 11mo ago
If you hand the Fed a lever to tax corporate revenue less wages paid to the 80% lowest paid workers (and exempt all other deductions) for such situations, it lets them create inflationary pressure on worker wages and deflationary pressure on pricing, which would cure the rent market within a few years at best.