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Antitrust lawsuits against real estate data provider RealPage highlight allegations that tech platforms give landlords an unfair advantage in rental pricing. In today's email, we examine the DOJ's evolving stance on "safe harbors" for data exchanges. These guidelines, once protective, now require a case-by-case application of the Sherman Act due to technological advancements. This shift means PropTech companies must closely scrutinize their practices for potential anticompetitive behavior, as following old guidelines no longer guarantees protection.

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Now, let's dig in!

How an Obscure DOJ Speech About Healthcare Antitrust Is Changing Real Estate

By now, you have almost definitely heard about the antitrust lawsuits being brought against real estate data providers, particularly RealPage. The numerous lawsuits and possible criminal investigations revolve around how tech platforms allegedly give landlords an unfair advantage in determining rental pricing.

When the lawsuits were first filed, both by renters and state Attorney Generals, many were surprised that the Department of Justice (DOJ) regularly weighed in to support the issue, suggesting that algorithmic-based pricing could constitute an antitrust violation. But, it was less surprising to the few experts who have been following the DOJ’s changing stance on what is called “safe harbors” for data exchanges.

Since the 90s, the DOJ has established guidelines to help industries avoid prosecution for anti-competitive behavior. These guidelines included specific qualifiers for safe harbors, such as using third parties to collect data, limiting the exchange to information at least three months old, and aggregating data so that it would not be identifiable by a participant. But, during a speech at a Law Leaders Global conference, Principal Deputy Assistant Attorney General Doha Mekki explained that these were no longer hard and fast rules as they did not keep up with technological changes.

“The safety zones were written at a time when information was shared in manila envelopes and through fax machines,” she said. “Today, data is shared, analyzed, and used in ways that would be unrecognizable decades ago. We must account for these changes as we consider how best to enforce the antitrust laws.”

AG Mekki explained that there are other metrics the DOJ considers when looking at a possible antitrust case. The nature of the data, particularly how sensitive or useful it is, and how well the data is aggregated are also metrics the DOJ considers. But now, even those will be used on a case-by-case basis, as they don’t always exclude data practices from wrongdoing.

“In our experience, both of these factors are helpful screens,” Mekki said. “But there may be markets and industries where long-held sensibilities about when information exchanges are more benign than harmful are insufficiently sensitive to market developments and thus fail to capture the broader range of harm in the modern economy.”

Safe harbor laws were established to help the healthcare industry, but they ended up being applied to every industry that shares customer or employee data. The same is true for the new stance that the DOJ has taken. Now, it will not give companies like RealPage an out just because they adhered to those previous guidelines. The DOJ has also decided not to create more of these guidelines and instead wants to use a case-by-case application of the Sherman Act.

“Rather than establish a complex regulatory regime or hyper-technical rules to police the industrial relations of firms, Congress wrote a law that was simple in its prohibitions and flexible in its application to civil restraints of trade. It’s an exercise in law enforcement, not regulation,” Mekki said.

Now, every PropTech company will need to have a good understanding of whether or not their platform could be considered anticompetitive, not based on explicit rules and safe harbors but on what the DOJ has considered collusion in the past.

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