The recent civil antitrust suit filed by the Department of Justice, along with eight state attorneys general, against property management technology company RealPage Inc. and several landlords highlights a critical issue: the need for thorough vetting of artificial intelligence (AI) tools. The lawsuit claims that RealPage’s revenue management software facilitated collusion among landlords to fix rental prices, utilizing nonpublic, competitively sensitive information to form its pricing recommendations. This has sparked significant concern within the legal and business communities, as such tools are increasingly prevalent across industries.
The DOJ’s complaint underscores the concept that pricing algorithms using nonpublic information for making recommendations could be inherently anticompetitive. As federal regulators adopt a more assertive stance towards these AI technologies, it becomes imperative for companies to thoroughly review the functioning of such algorithms. Businesses should document all pro-competitive benefits of the tools they employ and ensure they are indemnified or insured against potential government scrutiny.
Interestingly, the DOJ is not pursuing a per se theory in its case against RealPage, despite having previously argued that pricing algorithms amongst competitors can constitute a per se violation of Section 1 of the Sherman Antitrust Act. Instead, the DOJ is proceeding under the rule of reason, likely learning from past challenges encountered in cases involving “no-poach” labor litigation. This pragmatic approach allows for a more detailed examination of the facts of each case.
This enforcement trend points to a broader need for companies to understand not only their use of a pricing tool but also how that tool is utilized within the marketplace. If an AI solution requires sharing proprietary information, the likelihood that it could trigger regulatory scrutiny increases significantly. To avoid pitfalls, businesses should carefully document pro-competitive uses and potential financial benefits to consumers.
Companies must also guard against red flags, such as high compliance rates with algorithmic recommendations, which could suggest coordinated price-fixing. For example, the DOJ complaint alleges that more than 85% of final floor plan prices were within 5% of RealPage’s recommendations, indicating potential anticompetitive behavior.
The broader implications of the RealPage case suggest that AI tools can still provide considerable benefits, but their use must be meticulously documented and defensible. Companies should prepare for possible changes in software licensing agreements, especially as indemnifications may be less frequently offered by AI providers in the future.
For further details, examine the case United States v. RealPage, Inc., filed in the Middle District of North Carolina, case number 1:24-cv-00710.