Propmodo Daily

By Franco Faraudo · Mar. 6, 2024

Greetings!

The many lawsuits being filed against RealPage for its pricing algorithm have taken the spotlight recently, but it is not the only legal battle being fought by property management software companies. Yardi has also been hit with a similar suit. The case against Yardi doesn’t seem to be as strong as the ones against RealPage, but a recent Statement of Interest from the DOJ has squashed any hope that it might get thrown out. We take a look at the similarities and differences in today’s email.

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Now, let's dig in!

Yardi Price Fixing Lawsuit Is Weaker Than RealPage's but May Be Just as Harmful

We had written a lot about the price-fixing lawsuits against RealPage for its YieldStar rent optimization algorithm (including this article from back in 2020, before the lawsuits were even filed). But they are not the only commercial property management software being sued for its role in pushing rent prices up.

In September last year, a class action lawsuit was initiated against Yardi, focusing on its rent optimization software, Revenue IQ. This lawsuit frequently refers to the RealPage case, arguing that competitors' use of identical algorithms constitutes price fixing. The allegations against Yardi slightly differ from those against RealPage. Specifically, the lawsuits against Yardi highlight how a significant portion of the market, evidenced by a recent filing from the Arizona Attorney General, claims that 70% of multifamily landlords in Phoenix utilize RealPage's software. These suits accuse RealPage of employing coercive tactics to ensure landlords adhere to the pricing recommendations made by their algorithms, including threats of expulsion from the platform for non-compliance.

These points of argument do not appear in the lawsuits against RealPage. Yardi's software is notably less widespread compared to RealPage's offering. The court documents analyze instances where Yardi's tool was used in more than 15% of the available housing units, indicating its market control is significantly less extensive. There has been no documented evidence of Yardi engaging in practices to either incentivize or compel its customers to utilize this tool. In an official statement regarding the lawsuit, Yardi clarified, “Revenue IQ does not ‘mandate’ any specific actions, including setting advertised rent prices (also known as ‘asking rent’) or dictating rent increases. It is designed to adjust rental prices both upward and downward, responding directly to the current supply and demand.”

A statement of interest submitted by the Department of Justice (DOJ) suggests that these differences do not warrant the dismissal of the case. The DOJ's statement underscores that it is inherently illegal for competing landlords to collectively rely on a single algorithm for determining key pricing decisions, even if there is leeway to diverge from the algorithm's advice. "Competing landlords jointly delegating critical pricing decisions to a shared algorithm constitutes a per se violation of antitrust laws, notwithstanding any retained discretion to ignore the algorithm’s guidance," the document clarifies.

In support of this argument, the DOJ cites the case of The United States v. Socony-Vacuum Oil Co., which established a clear precedent: "Any collaboration that manipulates price mechanisms engages in illegal conduct. The fact that the members of such a price-fixing consortium do not dominate the market does not diminish the illegality of their actions. By increasing, decreasing, or stabilizing prices, they intrude upon the natural dynamics of market forces."

The DOJ seems intent on keeping property management software companies and the landlords that use them in the hot seat. They might even turn up the heat now that they have teamed up with the FTC to create the Strike Force on Unfair and Illegal Pricing as part of the Biden administration’s effort to curtail inflation. RealPage might be the company that sets the legal precedent against the legality of algorithmic rent optimization, but if RealPage is found guilty, Yardi would likely be next to face charges.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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