Curious to see how this plays out. Large property owners in the US are the primordial lobby. Law exists for the purpose of defending private property. Private property exists for the purpose of making money. The government exists to operate the law and defend these purposes. These dynamics are the origin story of the revolution. How far DoJ is allowed to go in biting the hand that allowed it to be created will be interesting. Of course this sort of collusive behavior long predates software, it is called "the invisible hand" of the market. So precisely what guardrails around this behavior will be established?
So, hotel is a lot older than rent. But, what has been there first? Without rent no hotel room and without hotel no need for rent.. hm. I have to think about it.
A little tongue in cheek. But only a little. In the reality most of us share, real estate is extremely powerful. Many tech people don't understand this.
Better. The hyperbole didn't help your comment. I think you'll find people more interested in engaging in serious discussion if you write with a tone that invites thought instead of reaction.
Sometimes. Most of the time commenting on HN is fighting with a compiler, one that is not a useful arbiter of correctness. I really don't have time for it.
Private property does not just exist for the purpose of making money. Your food is your private property, and it exists to nourish you. Your primary residence, if you own rather than rent, is your private property and it exists to give you shelter and a place to live life. Your car, if you have one, is your private property and exists to allow you to go places. Making money is but one of the uses property can be put to.
The real estate lobby is run by single family homeowners, not large apartment complexes. The latter is a relatively new entrant in the space, and hardly has any power.
Upvoting because I think you're making an interesting point.
But I'm not so convinced that residential landlords will push back on this. They'll let RealPage take the fall, and go back to price gouging and colluding the old-fashioned way, quietly and in private.
Nor do I think politicians are so beholden to any one lobby that they'd risk torches and pitchforks. RealPage got some very bad press recently and people are very very upset when they go to look at their bank accounts. Much easier to kill off RealPage and keep people from getting too riled up.
Therefore I think this will go through and RealPage will be penalized into oblivion, but landlords and politicians will both know that it was a worthy sacrifice to keep the profit flowing in the long term.
Raising prices is legal, but each rental company has to be independent. The rental companies broke the law by using a 3rd party company to collude to raise prices.
The lawsuit accuses RealPages of not just being used for the collusion, but actually orchestrating the collusion. It claims RealPages went to the point of attempting to coordinate lease start/end timing across landlords to prevent oversupply, and having daily pricing calls with their customers where they pressure them not to deviate from the algorithmic suggested price. That's in addition to using non-public rental and pricing data from its customers to calculate the algorithmic price in the first place.
Resembles a modern form of a 1994 case in which the Justice Department successfully went after airlines for using a marketplace to collude. I’d actually argue some of RealPage’s requirements and design choices may have been created to help evade some of the similarities to the case by taking agency away from management. https://www.justice.gov/archive/atr/public/press_releases/19...
"RealPage has undertaken this conduct with full and complete knowledge
of its illegality. One of RealPage’s pricing software’s main architects, Jeffery Roper,
is acutely familiar with the anticompetitive nature of coordinated algorithmic pricing
within an industry. Before pioneering RealPage’s software, Roper was Alaska
Airlines’ Director of Revenue Management when it and other airlines began using
common software to share nonpublic planned routes and prices with each other, with
the aim of heading off price wars. The Department of Justice’s Antitrust Division
(“DOJ”) reached settlements or consent decrees for price fixing violations with eight
airlines, including Alaska Airlines. Roper—who had his computer and documents
seized by federal agents—relayed about that experience that, “We all got called up
before the Department of Justice in the early 1980s because we were colluding.” He
adds that at the time, “We had no idea” that conduct was unlawful. Having now
brought analogous coordinated algorithmic pricing to multifamily residential real
estate leasing after the DOJ’s airline settlements, however, Roper can no longer claim
ignorance of the unlawful nature of this conduct"
Case 3:22-cv-01611-WQH-MDD Document 1 Filed 10/18/22 PageID.17 Page 17 of 26
So, I view this case as likely unsettled under current US antitrust law.
The underlying behavior seems really objectionable and should be illegal. The question is whether it is actually illegal under the law.
If a bunch of firms use the same software to set prices but do so independently and without any attempt to coordinate with each other… that’s a pretty decent defense?
(Can they argue that they had no knowledge of their competitors’ use of the software? There may of course be internal emails saying “we know X is also using it.” Suppose there aren’t AND the software vendor promised exclusivity to all of them independently. Would we want this to be illegal? What if all of the firms offer similar products and set prices by estimating the same demand curve?? This becomes a little far fetched of course.)
I don’t view this as obviously “per se illegal” territory. I would love to be wrong bc yeah it’s really objectionable, but I don’t think the case is a slam dunk.
So called “algorithmic collusion” of which this is likely an example is an unsettled area of theory
They did coordinate: the software had a policy that you had to take their recommendation at least n% of the time (I think 80?)
Edit: Per discussion below, it was merely strongly encouraged and effectively followed (in practice) to take the recommendation at least 80% of the time... in order to raise prices together...
The clients have plausible deniability because how can they know if everybody else is using it, and the service provider is "just a recommendation", so they're not guilty either.
If it's not ruled illegal (and it should be) then it seems like a great business model to copy in other markets.
They know that it works by competitors “working together”, it doesn’t matter whether they communicate via language or through prices combined with a service that both explains how it works and dictates how they all behave.
One piece of confusion here is that you do not actually have to prove a literal explicit agreement between the parties to be successful.
While tacit collusion is not itself illegal, conspiracy is.
Put another way:
You can prohibit folks from agreeing not to compete, no matter what form that agreement takes.
You don't have to know who you are avoiding competition with, etc
However you can't order people to compete just because they aren't
This has become a general problem with outsourcing and we really need to update the law on this.
Big hotel chains outsource their housekeeping--the chain doesn't pay under minimum wage--it just bids out the contract so the contractor can't possibly win the bid without paying under minimum wage.
The law needs to be updated so that fines and punishments against a subcontractor also need to be enforceable against the parent, as well.
'People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.'
I've read the complaint before. Nowhere does it say that users are penalized for not following the model.
Keep in mind that this is a document written by the prosecution and completely one-sided. Paragraph 7 says "RealPage explains that for its
services to be most effective in increasing rents, Lessors must accept the pricing at
least eighty percent of the time“
That is very different than what the poster above me claimed. Nobody has kicked out of the service for not following recommendations. The closest thing to a penalty that the document can come up with is that real page will call people and inquire why they aren't following the recommendations
Sure, I edited the above comment. Fortunately punishment for not colluding is not actually a necessary feature of cartels, only the collusion is. Which this obviously is.
The landlords were clearly communicating pricing information to one another with the intent of profit maximization. I don't see how software mediation changes that.
IANAL, and perhaps you are but I don’t believe it is 100% legal. Seems like a matter of degree. What the parent is describing could reasonably be construed as illegal signaling and/or pricing collusion if the market is itself the mechanism for collusion. There will be some interesting internal emails.
So if these landlords all got together every Monday and discussed detailed pricing / sales info that would be 100% legal?
What would be the purpose of this meeting other than to make implicit pricing agreements?
Does anti-trust law explicitly require a written / verbal agreement or does doing lots of things that looks like agreeing (without actually agreeing) count?
Saying “I’m charging this much because it’s the most anyone will pay so skip the work of figuring out pricing and just charge the same” is legal. “We agree to never charge less than $x” is not. The question is if realpage lead to landlords keeping units vacant when they couldn’t rent them for the realpage suggested price.
> If a bunch of firms use the same software to set prices but do so independently and without any attempt to coordinate with each other… that’s a pretty decent defense?
The software enabled coordination without rental management companies/owners needing to put in effort to do so. In the end all they cared about was maxamizing profits which in itself isn't illegal no matter how unethical it might be. The key here is proving that they knew what was going on. I'm sure they did all things considered. It's been going on for years.
The argument here (not saying I agree with it) is that it's common to let units sit empty over particular periods, based on other business decisions and an understanding of the market.
eg, If you have a lease that ends in September, the make ready process takes 2-4 weeks, so the unit will be available for lease again in October. There's not a high churn of residents in October-December due to holiday periods, etc. and demand doesn't pick up again until January. Therefore, it's better for you to let that unit sit empty now, because demand is so much lower for the next 2-3 months you won't be able to get the same increase in lease price as you will when demand skyrockets in January.
Another example is an understanding that some kind of amenity will change over a period. eg, a new public transport route is going in, or the property next door is being rezoned and demolished, from an industrial site to a commercial precinct, and so waiting for that to happen means that you can get a higher price on your lease once that happens, to the extent that it will offset the loss from leaving the unit vacant.
The defendants will argue that the analysis provided by the plaintiff doesn't consider these kinds of business decisions and that this part of the argument should be considered flawed.
I think part of the case is a slam dunk. RealPage offers multiple services.
One where RealPage gives you a recommended price and you are free to choose whatever price you want. They might ask you something along the lines of "why didnt you use our price?", but nothing is binding. This is like kelly blue book or a price consultant for apartments.
The other is the AutoPilot feature, where RealPage "takes the wheel" and set/publishes the listing price for you based on their model. The property owner is out of the loop, and RealPage is a single entity setting all of the prices for the subscribers.
I think the first case is pretty clearly legal, and the second has some valid concerns.
The point of both services is to help landlords maximize profit, but that isnt illegal by itself.
I dont think it’s quite blue book, because it’s personalised to that property, right? It’s probably the personalisation that really differentiates it and I suspect it’s models are also design to show maximum value rather than average price, so they move the market, rather than just reporting on it.
Haha, that's such an easy way to get around this thing. I'd just set up an LLC called "Price Advisor LLC" and instead of a cartel, we'd all just go to Price Advisor LLC and ask "what should I set it at?" and then Price Advisor LLC can just run the cartel. This is hilarious. I can enable full anti-trust myself out of a one-man LLC by just "using comparables".
Isn’t this what happens every trading day for Apple stock (and others)?
I couldn’t begin to hazard a guess as to what a share of Apple “should be” worth, but if I do a little electronic research, I now have the advice that “around $190/share” is probably right.
there is a difference between doing research when selling vs. asking a company for advice and being required to take their price at least 80% of the time.
there is also the issue of market concentration. generally speaking in a regular, healthy market many people hold stock and possibly undercut each other. In financial cases where there is actual price fixing going on (e.g. LIBOR) there has been a lot of prosecution.
The research you do in that scenario would just tell you the prices which shares had actually changed hands at. A decentralized market-based price discovery mechanism cannot be considered collusion or price fixing, since it’s exactly the opposite.
No, because it's decentralized. The Price Advisor LLC is sort of important there.
e.g. take a cartel that you genuinely think is a cartel. Now instead of them all colluding, imagine that they set up Price Advisor LLC, and that no two of them ever talk to each other to set prices. All price setting is done by Price Advisor LLC. Moving the price setting into this LLC does not make the operation not a cartel. The LLC saying it's "checking comparables" does not make it not a cartel. After all, if a legitimate cartel could dodge this by just making a new LLC, then it would almost always make sense to cartelize because you can always act as a cartel without being considered a cartel for the cost of $500.
Cartels don’t work without an enforcement mechanism to punish defectors. Otherwise you’d be crazy not to lower your rents by 10% and make it up on volume.
This is obviously true in many markets where price discovery is easier: Mobile network operators don’t need a service to report on their competitors’ pricing. They know it and somehow a cartel fails to form.
You can't make it up on volume, your product isn't elastic enough. There's only so many properties that you can own, and financing right now for both construction and acquisition is incredibly difficult. The only viable way for property managers to grow at the moment is to increase their margins for the same product, which as you're likely aware, means either decreasing their costs or increasing their prices. They are doing both.
It's not easy because it would never work. Landlords would be incentivised to lower their rent below the cartel level to achieve 100% occupancy. Cartels need an enforcement mechanism to work.
Landlords don't care about 100% occupancy if they are making sufficient profit per unit; the rent isn't constrained to some fixed premium over the mortgage & tax costs. They can just leave some construction material in the empty units and make up some expenses. Have you never dealt with a landlord that invented BS reasons not to return a deposit?
I believe that the matter of their defense is irrelevant. The truth is that real people were harmed by this, and they deserve reparations today. As to who pays, it must be the landlords. This is the supposed 'risk' they take on by being landlords, which everyone tells me is so great to bear.
Also to get on a soap-box, this is the truth of reparations, it is not in relation to a single event, it is an attempt to solve injustices that exist institutionally in our world today.
This approach is at odds with rule of law and historically has not redressed injustices but rather created societies where power is even more concentrated and even less accountable.
The primary purpose of any and all reparations rhetoric in the US today is to divide the electorate by anything other than economic position in order to maintain a status quo whose legitimacy is beginning to erode. And it's working quite well, since you're delivering grandiose proclamations while advocating for nihilism and ignorance towards the existing legal processes that will actually impact the lives of millions of people in the coming years.
I agree that contemporary rhetoric on reparations is quite poor. But, scholars today agree that reparations are a way of understanding our government's position on change and not on giving money to people (Reconsidering Reparations by Olufemi Taiwo is about this). You give some good stuff to think about with the historical point, but I still believe it must be tried again, and better this time.
So I don't discount the legal processes, I am saying they must be changed. That is how we can actually solve issues like this, instead of simply putting a band-aid on each time we have systemic issues like this.
I find myself to be an anti-nihilist as a matter of fact. Reparations is not an _ideal_ for which I have grounded in nothingness (nihilism). Reparations must be a state of being for our government, whose material being should be solving injustice and not propagating it.
Anyone who wants to change the legal system to deliver a specific outcome instead of follow a specific process is always going to be my enemy.
I would be happy to die for habeas corpus, the right to face your accuser, the right to a trial by jury, freedom from ex post facto expropriation, public trials, the right of appeal, and countless other things which literal wars were fought over for a good 700 years of hammering out common law.
To be ignorant of the protections this brings and the costs its absence imposes is legal nihilism, the focus on a single outcome in the present with no provision for the future.
I hope the prosecutor makes their case well and the jury follows the judge’s instructions and returns a verdict favorable to tenants. But if the prosecutor drops the ball or the jury makes a decision that baffles me, upholding that process is more important to justice than any single outcome.
Many Americans are not only willing to die to uphold this, but part of their job is also to kill in its defense. The pseudo-heidigerian stuff about government having a state of being just reads like you’re gearing yourself up to rationalize imposing your beliefs through nominative positioning.
divide the electorate by anything other than economic position
Punishing landlords for colluding against tenants by forcing them to give back the money is pretty much the opposite of the status quo and about as focused on pure economics as you can get.
I would disagree in very strong terms. The entire economic, legal, and taxation system of the US are organized in a certain way that's only a couple of hundred years old.
Returning some money to some tenants as a one-off and restricting some forms of landlord collusion is about as far as you can get from pure economics or structural reform. Both capital R reparations and reparations as a social justice hobby horse are ultimately intended to preserve and legitimize the existing system, even in their maximalist demands which tend to deflect and discredit more concrete advocacy.
Economics is a vast field with a long history and many possible futures so it's quite sad that the horizon for many people is "american neoliberalism with more regulation and redistribution" or "american neoliberalism with less regulation and redistribution."
I can think of at least three actual opposites of the status quo: one would be a georgist tax that makes holding land speculatively unprofitable, one would be a singapore style nationalization where the government purchases all of the apartment buildings at their tax-assessed rate but allows for a market in 99 year leases, and still a third would be ex post facto arbitrary expropriation without compensation in the style of many communist revolutions.
"Some landlords return .01% to 15% of their last 2-3 years of passive revenue increases and promise to raise rents more arbitrarily" is not a bad thing for those renters, but in terms of economic trends and policy it's quite literally using existing law to _return_ to the status quo.
This is a good example of why most people don’t belong in politics or management.
You’re basically saying that because this violates your code of ethics, it should be punished by the legal system wherever or not they’ve actually broken a law. So the system of laws is meaningless, what’s important is how you feel, and your moral code.
And I get it, we probably all feel this way on some level. But I’m glad society doesn’t operate that way.
Today, we punish people by taking away their money. Taking away someones money should not doom people to poverty over this kind of stuff! I am not saying kill all landlords here. I am saying that the landlords profited too much and it must be made fair.
There should be no 'punishment' of the landlords truly, I am saying we make a system where landlords can not unjustly profit from us (and I do speak generally here).
Stuff like this is what causes the housing crisis, it must be dealt with systemically, not by giving a few people none-the-wiser a lesser life.
> I am saying that the landlords profited too much and it must be made fair.
There's for better or worse no law against 'too much profit' in the general case. How would one define 'too much'? A certain margin? That has historically led to merchants increasing their costs so they can profit more in absolute terms once the relative profit cap is met.
Seems like the answer is just to allow more construction and densification, which in turn creates a more competitive market for housing. If they then tried to aggregate, roll-up and collude they would fall under the Sherman act no?
Well the problem is that with these software systems, we have already answered your question. If we do not change something (after seeing this!) then we have allowed 'dumb' collusion. Where these landlords can profit exceedingly and then claim complete innocence.
The landlords see their rent prices increase in their checks each month, it is not as if they have not noticed increased profit over the last years due to this.
So if this is allowed, we will start to see increased centralization and then passive acquiescence to gross profit.
> Where these landlords can profit exceedingly and then claim complete innocence.
Define 'exceedingly.'
> So if this is allowed, we will start to see increased centralization and then passive acquiescence to gross profit.
The market is already fairly efficient, except where laws like rent control forbid market efficiency.
The issue is that while demand exceeds supply of housing in metro areas, the cost to acquire/rent will tend towards the maximum amount a renter/buyer can bear. On the other hand, when supply exceeds demand, it tends towards the cost of construction.
This software just makes the market more efficient in the same direction it was already heading.
More houses solves this. Suing the pricing tool for existing does not.
To define exceedingly. Well I guess I just see this as a natural partner in the housing crisis. To combat things like this is to help solve the housing problem today. The prices are not going up like this because there are too many people, the prices are going up because of economic centralization.
> The prices are not going up like this because there are too many people, the prices are going up because of economic centralization.
Well no, they're going up because there's not enough houses near the jobs. Studies show the US is short 2-6,000,000 homes. Until that changes, prices will only keep going up. The centralization here is making it move faster than it otherwise would but the bounds and direction remain unchanged.
Oh please, you're ignoring contrary evidence, like the fact that landlords were using the existence of new housing as a justification for raising their own prices in order to stay 'competitive' (in terms of profit, rather than in terms of price). There's a simple and easily understood argument about why the behavior is illegal and anticompetitive.
Coming in and harassing people for definitions and quoting economics 101 while ignoring the empirical evidence isn't a good way to discuss an issue.
> Seems like the answer is just to allow more construction and densification
The system very often doesn't actually support that in fact, so I don't find it a particularly compelling argument.
Sometimes systems suck from the get go, sometimes they degrade over time. Some of us are getting tired of the heads I win tails you lose "democracy" magic show, and the runtime we are in supports recourse outside of the "agreed upon" (wink wink) legal conventions, and I suspect it is more of a coordination problem than a consensus or will problem.
This software is collusion, and anyone using it today should be penalized. I don’t care what excuse they have, it’s clear to someone with half a brain (most landlords have at least half) should realize software that fixes prices for you based on local demand is going to be collusion. It’s pretty clear how that stuff works, the only unclear thing is if there is a loophole or judge which will let the landlords off in favor of the zombie economy over actual humans.
The collusion here is what, that they all agreed to use the same software?
What if I create software that recommends rates to charge, and I market it. Proven to get you up to 20% or more extra rental income! Then everyone just happens to use my software, and the rates are then 'recommended' to everyone based on an analysis of what the market will bear. No collusion. Is a law broken in this case? Or is the market just lacking in competition.
The software isn't making landlords do anything, it's recommending an optimal market price. Is it any different than a quote from a commodities futures exchange being used to price corn at the local grocery store?
The whole point of pro-competition laws is to stop large corporations or a cartel from using market power to control pricing, which is the scheme you just laid out. So, yes, that would be illegal. You can say "no collusion", but you (the operator) have effectively organized a cartel. Each individual landlord may escape liability, but you will not.
Commodities exchanges (I believe) work on a competitive bidding system, which is basically the opposite - you have willing buyers and sellers with roughly equal power/information.
> The whole point of pro-competition laws is to stop large corporations or a cartel from using market power to control pricing, which is the scheme you just laid out. So, yes, that would be illegal.
How is a Zestimate or Redfin home value estimate legal then? Or a Redfin rental estimate? [1] Would it become illegal - or a cartel - if too many people started using it to set rents?
Should we forbid tools to help landlords figure out how much their places should rent for?
Yes, if it causes harm to people. Being a landlord is a job (so I'm told), do some math, figure out how much is fair (cost:labor calculation) then ask on the open market if people want to pay that. The problem is that the underlying system here did NOT do this calculation, hence price-gouging. It is the lack of free market that is the problem, thanks to this price centralization.
It might be. RealPage's definitely is because they've clearly accrued market power in order to control pricing. In Redfin's case it seems like more of a marketing gimmick, but if you could prove it had a meaningful effect on driving prices up, then yes, the FTC should order its' removal.
> Should we forbid tools to help landlords figure out how much their places should rent for?
It depends? Playing moneyball (i.e. charging the maximum the market will bear without a serious, violent response) with a necessity like rent should be illegal, and many of these tools seem designed to do that using market power, which is explicitly illegal. If the tool just gave some local averages based on things like amenities, that might be ok.
knowing what it does, yes that is collusion. Look at the etymology of the word: it literally means 'playing together'. It doesn't require people to meet up in a smoke filled room in supervillain outfits and say 'let's collude, heh heh heh'. Everyone is sharing their rental data to help the software calculate the optimal price, and everyone wants to get extra rental income, per your scenario. The diffrence from the commodity exchange is that exchange operators are not promising specific price outcomes for commodities.
It does operate that way, whether you want to believe it or not. Every political decision is influenced or directly related to the ideology of those in power.
Funny how feelings are brought up and mocked when it’s about the disenfranchised. Meanwhile, the ruling elite gets their fee fees hurt by socialists and it’s how it should be.
It’s also just impossible. To pay an amount that even meaningfully improved the lives of 10% of the people it was aimed at, we’d bankrupt ourselves. If your government printed enough money to give let’s say 12% of the population an amount to make up for lost income over several generations, it probably wouldn’t help much, and even if it did, that money would be worthless due to hyperinflation and government bankruptcy.
It’s a well-meaning idea that’s proven stupid by even elementary school math. Anyone who suggests it is clearly incapable of rational though.
I am not saying the solution here is by giving people dollars. But creating a system where landlords (by disallowing this kind of price centralization) can't screw over their tenants.
And saying that people who argue for reparations are incapable of rational thought is quite rude.
I'm using reparations as a general term of making people whole. The landlords, whether or not they did anything morally wrong, have taken what they should not have (collusion). Therefore, reparations are called for. This is the argument I am making, predicated on the Justice Department's agreement of the complaint given leading to this case.
You may be right that it’s rude, I apologize. But it’s not incorrect if we’re talking about reparations the way, it is typically used in American discourse, but perhaps you meant it some other way also
Reparations in the context of this antitrust lawsuit == a settlement of the class action lawsuits that will inevitably happen. Same word, but nothing to do with other the other kind.
People like you are why frivolous lawsuits like this exist, because they simply feel that "harm" occurred because something you they didn't like happened.
My argument is that if harm can be proved, those harmed must be made whole. I don't understand how that is frivolous. I am not the one saying that a collusion suit should move forward here.
> The question is whether it is actually illegal under the law...
This has become a painfully, utterly common trope on Hacker News.
The Sherman Anti-Trust act is one paragraph long.
It doesn't attract the same spirited interest from judges as the constitutional amendments do, which are even shorter. Judges and Justices have been writing the law on those for a long, long time, including reversing their own precedents, "ignoring" case law - really just fucking disagreeing with the past. To hell with case law.
> underlying behavior seems really objectionable and should be illegal
This is what matters. At the end of the day, if the government wants to win these cases, it's not going to be by making RealPage look bad - one kind of tomfoolery - or by stare decisis - another kind of tomfoolery. Judges and Justices are writing anti-trust law.
So give them some good fucking propaganda. Make them give a single utter fuck about something as utterly god damned dull as this. Align it with their political opinions, because that is what decides these cases.
The same thing is true about the Google case. The FTC doesn't even care about advertising. The DoJ doesn't care about apartment pricing. The underlying problem is that the people litigating this have no passion about the thing whatsoever, they are way too big picture "company bad" and don't have much else to go on.
So my partner is in hr for a large firm. There was 3 day event last year where a bunch of her and peer companies got together with a middle person to “level set” and share aggregate salary data.
The entire point of the event was to ensure incoming data to the salary aggregation company was sound.
They wait 2-4 months for a report / dstabase and they can now lookup industry salary by level and function. Its super accurate because they all go together beforehand to ensure that!
Id be shocked if the same thing wasnt happening here. No need to collude / conspire on actual offers when you already have super accurate aggregate pricing information, you already know what your competitors are going to be asking for like properties, price a little up or down.
This kind of “price discovery” (for labor in this case) is perfectly legal. Plenty of markets have “liquid” pricing and don’t need vendors to provide discovery, yet corresponding cartels don’t emerge on this fact alone.
What made a difference in cases like the Silicon Valley anti-poaching regime was direct anti-competitive action: Hiring away Apple Engineer A would be good for me, but I won’t because I’ll get an angry phone call from Steve Jobs and face potential retribution.
The crux of a case like this is whether RealPage was merely facilitating market-making price discovery (good all on its own for maximizing landlord profits—legally!) or was explicitly or implicitly creating incentives for landlords to act against their individual interest in favor of the collective interest.
Lawyer here. Hard disagree. The software is sold for the purpose of reducing competition, and gives advice on how to best achieve that. Everyone colluding is buying and using the software with a goal of not competing with each other.
That is just about a textbook case.
You can remove the software. Imagine you all pay someone to write a number on a piece of paper that gets posted on a light pole once a month. You don't get a say what the number is, but you all agree to set prices at that number 80% of the time.
This is illegal. Even if you remove the 80% and say "we recommend you use this number 80% of the time to maximize your non competition", it would be illegal
This is not a close case. Fixing the price this way is illegal.
Agreeing not to compete at all is illegal.
It does not matter if you get someone else to set the price. At the point you all agree not to compete, you've clearly violated the act.
As for whether it's per-se illegal, per-se illegal went out the window on basically all illegal acts under the sherman act over the past few decades, except a few remaining forms of price-fixing.
But you would still win the cases under the rule of reason anyway, and it would not be close there either.
People seem really hung up on whether they agreed with each other explicitly.
They don't have to. Conspiracy suffices. Tacit agreement is not illegal, but it has to be truly tacit. This is not. As I said elsewhere: it is illegal for them to conspire to not compete matter what the form of the conspiracy.
However if they just aren't competing, you can't order them to compete.
This is a clear case of the former - they are conspiring towards a common non competition goal. They knew what would happen if they conspired this way.
It's like trying to avoid a conspiracy to commit murder charge by saying you never explicitly agreed to hire a particular hitman, you instead just followed the directions some software gave you when it said "in order to maximize the possibility of your husband being dead, we recommend depositing at least five million at the following address". Good luck with your claim that you didn't agree to anything with anyone - you were just maximizing some probabilities.
Hell, i bet when they do discovery the company has not been as careful as they think, and there are chats/emails about how successfully they've been able to destroy competition or raise prices or whatever.
Because there always is.
Is the Sherman Antitrust Act the legal basis for the lawsuit against the software company?
The Sherman Antitrust Act seems to deal with interstate commerce. Clearly the software is sold in many states. Some rental markets are multi-state. Some apartment management companies are multi-state. Would it apply to those rental markets and management companies that are not interstate?
I don't know about merits of this case but some of the controlling interstate commerce interpretations are quite broad: https://en.wikipedia.org/wiki/Wickard_v._Filburn Even growing your own wheat affects interstate commerce: your alternative to growing it yourself is buying it on the open market. This is an activity which, in aggregate across thousands of farmers, would affect interstate commerce.
In general, most state antitrust and unfair competition laws mirror the Sherman act. So even if you could construct a purely intrastate scenario, it would not make much difference in practice.
The supreme court says raising your own cattle for your own personal consumption is interstate commerce because you are replacing a purchase of beef in an interstate market.
So, you don't even have to participate in commerce for your actions to be considered "interstate commerce," much less participate in an actual interstate commerce.
Heh, dannybee once called me (we work for the same employer) and said: "I see you are using a particular pointer analysis algorithm. Stop it right now, it's tainted with patents. BTW I am a lawyer. But: I'm also a pointer analysis expert, and you don't want that algorithm, it sucks, this other one is better."
I'm confident the number of lawyers with pointer analysis expertise in this world can be counted on the fingers of one hand... probably even after a gruesome lawnmower accident.
I don't know whether it was RealPage being used, but when I was leaving my apartment outside of D.C., I wanted to extend my lease by 3 months, into December. A very normal occurrence.
I went to the leasing office and asked to extend. We sat down and they typed some info into the computer. They said I could get the lease extension for 50% more than my current rate per month.
This seemed ludicrous so I asked why it was so expensive. They calmly explained about the new software they were using which set the rates for all new leases, which they were not authorized to override. They said the increased cost was due to the very large new building which went up a couple blocks away. Not owned by the same company. The building had been completed around December the year before. Many tenants were expected to be leaving around that time when their 1-year lease was up.
I couldn't believe this could be legal and asked the agent how this was legal to collude with another building. He said it sure seemed odd but all of the buildings in this city had just started using this software. This was just some guy working in a leasing office but he claimed it was because the boom in high-rise apartments in the city had created too much competition and the owners had all agreed to use this software to fix that.
Eventually, after some back-and-forth, I learned that changing my lease end date by a couple days reduced the rent increase from 50% to 5%. So I ended up with a 3 month and 6 day extension.
I got a renewal notice a few months ago, and they wanted to raise my already pretty high rent by like 15%. It was higher than what they charge for brand new apartments, not even counting leasing incentives. I made a counter-offer and got told 'we don't negotiate'. The propublica article (https://www.propublica.org/article/yieldstar-rent-increase-r...) talks about how exactly this lack of negotiation / removing the human element lets them drive up rents across the board.
Experienced the same system in the Bay Area. Rent increases by 300 - 500, but the new lease is lower. You can try signing a lease on a new apartment and deal with the logistics of moving, having some period of extension/overlapping rent payment, which is a huge hassle and may not even save you money.
Why would they want to add the expense of cleaning out an additional apartment, additional wear and tear, and pissing off a tenant who is likely to leave in the future only to collect less rent for the privilege? There must be some MBAs involved in that brilliant maneuver.
That's why the top marginal tax rate for incomes is too low: Landlords (and other rentiers) have little disincentive to try to maximize their incomes at the expense of everyone else.
My landlord uses RealPage and the property manager told me they (my building) target a 50% churn rate. If fewer than 50% of households move out at the end of their lease, they know they're not increasing rents fast enough.
Because they calculate they are more willing to do that than the tenant is willing to move. It only costs them a month or two of the difference in rent they are going to charge a new tenant. They still make thousands more in the end.
Meanwhile, the tenant has to pay more money to move than it costs the landlord to rent the place again. The landlord knows they so they offer an extension at an increase of about the same amount it would cost to move.
They are betting they can do absolutely nothing and make more money. Even if they lose that bet, they still make more money.
There is zero downside when there is high demand for housing and other landlords are doing the same thing.
I think this is the exact reason why government should intervene - the market solution doesn’t work. Unfortunately so many government policies are working to make housing scarce and creating the problem in the first place.
The Market solution is working. The fools who are willing to put up with this behavior and the Bay Area are being parted with their money. It is not long-term pain - It is short term pain repeated many times by many fools.
Government is how we got into this mess by limiting the supply of housing through zoning.
Allow people to build up the unit in their backyard or in their garage and you'll unlock a whole new section of housing supply that will drive the bottom of the market down
It's the same with jobs in most areas that aren't big cities or tech hubs; it's a huge pain in the ass to switch jobs if you aren't in a super high demand field. Often requiring a substantial uprooting and move.
Lots of uneven sectors where huge portions of individuals loose to "market forces".
This is how dynamic pricing for event tickets works. Everyone uses the same software which prices tickets across all secondary and primary markets. One way to create artificial scarcity to inflate prices is not offer tickets or apartments for rent. Another way is to initially charge outrageous prices so that a less outrageous price is more appealing. Like a parent paying outrageous prices for a Taylor Swift concert months in advance insure that their child can see the show for their birthday people looking for apartments are forced at the artificially inflated prices because that location has their employment and social connections.
Well, you see, the new fancy construction has to pay off its construction loans so it has to rent at an increased price. The small apartment buildings have to match it, or they’re simply leaving money on the table.
Yeah, this makes no sense and is pretty blatantly bogus to anyone with at least a high school understanding of supply and demand and is also pretty blatant collusion. They didn't also trot out gentrification, due to the new building going up, as a reason to raise the rent too?
You shouldn't always expect prices to go down when there is new supply, because it can also increase demand. If people are investing and building new units in a neighborhood, it is usually improving it, which makes it more desirable, more people want to live in the area, and prices go up. If you are lucky, this reduces demand elsewhere and overall prices might drop.
No, you should absolutely expect prices to drop, it's extremely well documented.
However, landlord advocates spread the counter narrative, of people mistaking symptom for cause, and unsophisticated public laps it up. People hate to see change and want to blame new buildings for high prices, even though they lower them universally.
If vacancy is at 0%, you increase supply and vacancy is still at 0% you should absolutely not expect prices to fall. In fact, you should expect exactly what is happening, the market will reevaluate it's prices upwards until vacancy reaches some positive value. It's economics 101. This software just makes the process hyper efficient, where as normally it'd be far slower as landlords would not have perfect information.
The only way to fix this is to drastically incentivize building to the point that supply is higher than demand.
I was going to link to a review of the literature on the local effects of new construction, which reviews the empirical literature showing that any additional demand is more than offset by additional supply, but I'm having trouble finding the PDF. (For global effects, remember that building new housing does not change the global demand for housing, as it does not create new people, so hopefully it's obvious that new housing supply must be a global downward pressure on prices).
But this newer paper is far more comprehensive on far more topics. IMHO it's far too charitable to some really bad and research with highly biased and methods (e.g. Damiano) but it still does point out the flaws there.
> If people are investing and building new units in a neighborhood, it is usually improving it, which makes it more desirable
I'd argue that most people in the US don't want to live next to giant apartment complexes, even if they themselves already live in one. People like sun, and skylines, and space. An attractive, well maintained apartment building that has parking for all it's residents in an area that's not too crowded doesn't have to hurt the neighborhood, but it's not going to make it more desirable. At best it just accommodates the people who already want to live there.
> he claimed it was because the boom in high-rise apartments in the city had created too much competition and the owners had all agreed to use this software to fix that.
Rent homogenization software is doing the same thing realtor associations have done for years -- offer incentives to users who hold the line on "standard" pricing and penalizing those that don't.
Then wrap the above scheme up in something more convoluted so it doesn't immediately look like collusion.
My building also uses RealPage and I got the lease renewal notice the other day. I was on the way out when I saw the note so I skimmed it and only saw the "20% increase" number not realizing it was for if I wanted to switch to a month-to-month lease. When I read it fully later it ended up only being a ~3% lease for a full year, which is actually kinda reasonable considering other rents I saw in the area on Zillow. Very strange.
Also around DC area, the leasing office folks told me that the price changed dynamically and could only be overruled by the HQ. They said that many companies use that software in order to obtain their "optimal" price for the area, which is of course observationally equivalent to colluding with extra steps.
BTW, more recently I saw the same thing with large contractor companies. One quoted me an insane price for something and I asked why, and they replied that it's the price that the software (ServiceTitan) tells them to charge, and even showed me their screen.
Again, they said ServiceTitan decides the price depending on "the average price of other companies in the area" which is code word for you-know-what.
Am I missing the obvious here, a smart and nimble company can corner this market by lowering their price by X. They would have to give up X per unit but they make it up by (volume * lower_price). Isn't that how the market is supposed to work? Like if I want all the business and there's not an obvious differentiator I will compete on price?
Typically the price fixing part is one small feature of a large software suite, and deviations require written justification submitted to the provider (with the implied threat of losing access to the management software).
That's not how it works because there is no volume. You can't provide more supply if there's no supply to provide. Each building has a fixed number of units and the management for those buildings are trying to maximize the value they get out of each unit. Most cities have a mostly inelastic number of units and population grows every year, so you can pretty much charge whatever you want and people will pay it since there's no alternatives.
Why doesn't someone just build a new building? Mostly they will be blocked by NIMBYism. NIMBYism is a near universal philsophy, to the point that renters who would benefit from this are typically NIMBYs too. Sometimes they're the loudest NIMBYs, It will be pretty much impossible to build anything new until the state takes control of building away from localities and forces them to allow building.
This assumes vacancy is at 0%, for cities like SF I can see this, but do all cities have near 0% vacancy rate? Genuine question, I don't know. I would offer at lower price and have all my units filled.
I can certainly see ways a third party company could help allow companies to engage in anticompetitive behavior. IANAL, but I expect proof of anticompetitive behavior resulting in harm to workers would need to be demonstrated. For instance if the third party software used previous pay data from a different employer (not disclosed by the applicant) to keep a salary below market rate.
No. The third party is the one colluding in your example, assuming the facts there are the same here: one software vendor, all the companies in a city are using it, software is driving wages in a direction profitable for companies and worse for employees of said company.
If they are found guilty will renters be getting massive checks from the rental companies that have been ripping them off? Will rental prices drop by huge percentages? If those things don't happen where exactly is the justice?
I know it's a fantasy, but in my ideal scenario, anyone that was involved with the creation, perpetuation or use of the software should be forced to disgorge all revenues accrued while the software was in use, including full refunds to tenants that were affected by use of that software. Also, personal liability for the leaders/managers of the company, so they can't just dissolve and slink off to do this shit again.
My own experience: I live in LA and know that almost every 100 unit+ building within a few blocks uses RealPage. I know it because I had to apply to them through it.
The software has completely ruined the market here and every leasing agent pretty much says "I have no control over this, if you see a lower price apply to lock it in but other than that the algorithm sets all the pricing. I can't modify it."
It is very obvious that all these buildings are colluding with each other to price their leases. It's pretty much a simple positive feedback loop of increases. Since everyone is raising their prices, the consumer has no choice but to pay the high price. Even smaller buildings who don't use this software, look at the prices set by it and use it to set their own pricing.
I think the conduct is egregious and clearly illegal. If this was one building using it, it wouldn't be. But when almost every building uses it, it clearly creates a monopolistic market
Criminal penalties for the landlords and at least triple refunds issued to affected tenants. Also build so many new apartments that the prices fall since landlords are forced to compete to find tenants.
Please sue the ever living crap out of the company and let's make sure Apartment Owners feel the heat for willingly participating. We're in a country wide housing crisis that has is having downstream effects into the environment, access to healthcare, GDP, jobs, and investment.
meh. Violence only in response to violence. However, profiteering after making sure people do not have a choice calls for 100% of your profits removed.
Here's the other popular and illegal apartment building inflation practice that doesn't require software:
* Make very stiff penalties for accepting anything besides a 12 month lease, EXCEPT when the renewal date falls outside of a designated 2 month period.
* Set this 2 month period to coincide or overlap with the same renewal period every other major player in your housing market uses.
* For any lease renewing outside that 2 month period, change up the optimum price point you offered to be a slightly shorter or longer lease period. This will shift tenants into the desired renewal period within a few years and you'll benefit even if they switch buildings in the long run, as long as most other buildings are doing this too.
* Add very strong penalties for lease-breaking, including such tactics as charging as much as 135% of the monthly rate for every month remaining on the lease. Unless they re-rent the building, and then the fee is 135% - whatever they get for rent for that period (hint: want a cheap apartment for your employees? Use the lease breaker apartment and charge them the difference!)
* Add the same 135% increase for the post-lease month-to-month period to force any renewals to make their decision quickly during that renewal period.
Get enough major players to do the same in the same area, and you have:
* Artificially increased demand during that designated 2 month period when everyone in the area renews.
* Artificially constricted supply during the same period, as renters won't release their current place until they've found a new one.
* Ensured that any newcomers to the area will get locked into the same renewal cycle within a few years at the most.
Even if they leave your complex, as long as you've shifted their renewal cycle you will benefit in the long term. There's one less apartment available for rent and one more apartment seeker looking for a place during the same period that most others are looking.
This is one of the major causes of housing inflation. Also, homelessness as people get priced out of the housing market.
A lot of other things go into the reasons we're seeing 5-10%+/year rent increases when the population only increases 0.5%. Way too many of them come down to exploitative wealth extraction by multistate or multinational corporations. This wealth does NOT flow back into your community.
We can generate a rough distribution estimate of this behavior pretty quickly..
If you start at an EVEN distribution of renewal dates right now (it's unlikely but for argument):
After 1 year: 33% renewing in the same 2-month period
After 2 years: 50%
After 3 years: 66%
After 4 years: 83%
After 5 years: 99%
The actual distribution is going to be less than that 99% due to a lot of other factors. Such as only 80% of the leases following this same practice, and move-in/move-out pressure in an area. But the impact of this behavior will still be seen.
This practice is price fixing.
quick code:
import pandas as pd
import numpy as np
# Initial distribution: 1000 leases evenly distributed across 12 months
initial_leases = 1000 // 12 months = ["Jan", "Feb", "Mar", "Apr", "May", "Jun", "Jul", "Aug", "Sep", "Oct", "Nov", "Dec"]
# Initialize a DataFrame to track the distribution over 6 years
distribution = pd.DataFrame(0, index=np.arange(6), columns=months)
distribution.loc[0] = initial_leases # Set initial distribution
# Function to update the distribution for a given year
def update_distribution(year):
for month in months:
if month in ["May", "Jun"]: # 12-month renewal
distribution.loc[year, month] = distribution.loc[year - 1, month]
else: # 10-month renewal
# Calculate new expiration month (10 months later)
new_month_index = (months.index(month) + 10) % 12
new_month = months[new_month_index]
distribution.loc[year, new_month] += distribution.loc[year - 1, month]
# Update the distribution for each year
for year in range(1, 6):
update_distribution(year)
# Displaying the distribution
distribution.T # Transpose for a better view
Everyone should by law have the right to break a lease with 2 months notice. Seems like a fairly simple solution to keep these dynamics from happening where people all start new leases close to simultaneously.
A major stumbling block might be (IANAL), what viable cases are there?
* The software company won't have nearly enough money to be a viable defendant.
* Each victim won't have lost enough to sue by themself, unless the violation allows a large multiple of damages. Their harm is (guessing) 15% of rent or a year. Even a $2.5K/month apartment doesn't add up to enough to pay a lawyer.
Can a class action combine such a wide variety of plaintiffs and wide variety of defendants? Could it be nationwide or state by state?
> The software company won't have nearly enough money to be a viable defendant.
Corporate death penalty seems warranted, both to end the behavior and to send a stern warning to anyone else who might try it again. Victims (read: millions of renters) will never be made whole, but at least you stop more people from being victimized.
I know, I know, it's possible to condemn and work against multiple problems at once, but it's just weird to me that there's so much more antitrust energy expended on free internet search that is very easy to not use than what looks like a pretty obvious price-fixing cartel that directly harms consumers.
Not really sure why people complain so excessively about dynamic pricing software. Whether for flights, concerts, or apartments - sellers will naturally seek to maximize profits. Software helps with this.
Housing and apartments are in many senses artificially expensive. Existing laws and regulations make it very difficult to build, appreciating the value of land and buildings. If people want lower rents - making it far easier to build is one of the best solutions.
198 comments
[ 3.6 ms ] story [ 222 ms ] threadInteresting how in your own head you are. Maybe DoJ needs to show the government and law are for all - not just "landlords".
But I'm not so convinced that residential landlords will push back on this. They'll let RealPage take the fall, and go back to price gouging and colluding the old-fashioned way, quietly and in private.
Nor do I think politicians are so beholden to any one lobby that they'd risk torches and pitchforks. RealPage got some very bad press recently and people are very very upset when they go to look at their bank accounts. Much easier to kill off RealPage and keep people from getting too riled up.
Therefore I think this will go through and RealPage will be penalized into oblivion, but landlords and politicians will both know that it was a worthy sacrifice to keep the profit flowing in the long term.
brought analogous coordinated algorithmic pricing to multifamily residential real estate leasing after the DOJ’s airline settlements, however, Roper can no longer claim ignorance of the unlawful nature of this conduct"
Case 3:22-cv-01611-WQH-MDD Document 1 Filed 10/18/22 PageID.17 Page 17 of 26
The underlying behavior seems really objectionable and should be illegal. The question is whether it is actually illegal under the law.
If a bunch of firms use the same software to set prices but do so independently and without any attempt to coordinate with each other… that’s a pretty decent defense?
(Can they argue that they had no knowledge of their competitors’ use of the software? There may of course be internal emails saying “we know X is also using it.” Suppose there aren’t AND the software vendor promised exclusivity to all of them independently. Would we want this to be illegal? What if all of the firms offer similar products and set prices by estimating the same demand curve?? This becomes a little far fetched of course.)
I don’t view this as obviously “per se illegal” territory. I would love to be wrong bc yeah it’s really objectionable, but I don’t think the case is a slam dunk.
So called “algorithmic collusion” of which this is likely an example is an unsettled area of theory
Edit: Per discussion below, it was merely strongly encouraged and effectively followed (in practice) to take the recommendation at least 80% of the time... in order to raise prices together...
Paragraph 7
“RealPage explains that for its services to be most effective in increasing rents, Lessors must accept the pricing at least 80 percent of the time”
Yeah this is collusion.
The clients have plausible deniability because how can they know if everybody else is using it, and the service provider is "just a recommendation", so they're not guilty either.
If it's not ruled illegal (and it should be) then it seems like a great business model to copy in other markets.
While tacit collusion is not itself illegal, conspiracy is.
Put another way:
You can prohibit folks from agreeing not to compete, no matter what form that agreement takes. You don't have to know who you are avoiding competition with, etc
However you can't order people to compete just because they aren't
This has become a general problem with outsourcing and we really need to update the law on this.
Big hotel chains outsource their housekeeping--the chain doesn't pay under minimum wage--it just bids out the contract so the contractor can't possibly win the bid without paying under minimum wage.
The law needs to be updated so that fines and punishments against a subcontractor also need to be enforceable against the parent, as well.
Keep in mind that this is a document written by the prosecution and completely one-sided. Paragraph 7 says "RealPage explains that for its services to be most effective in increasing rents, Lessors must accept the pricing at least eighty percent of the time“
That is very different than what the poster above me claimed. Nobody has kicked out of the service for not following recommendations. The closest thing to a penalty that the document can come up with is that real page will call people and inquire why they aren't following the recommendations
Good overview of signaling here - https://www.jonesday.com/-/media/files/publications/2016/09/...
Doing it secretly would invite scrutiny and reason to issue subpoenas though.
What would be the purpose of this meeting other than to make implicit pricing agreements?
Does anti-trust law explicitly require a written / verbal agreement or does doing lots of things that looks like agreeing (without actually agreeing) count?
Not fine: “I’ll set my price to $X if you do as well.”
The hard cases arise when this communication is obscured or implicit.
The software enabled coordination without rental management companies/owners needing to put in effort to do so. In the end all they cared about was maxamizing profits which in itself isn't illegal no matter how unethical it might be. The key here is proving that they knew what was going on. I'm sure they did all things considered. It's been going on for years.
eg, If you have a lease that ends in September, the make ready process takes 2-4 weeks, so the unit will be available for lease again in October. There's not a high churn of residents in October-December due to holiday periods, etc. and demand doesn't pick up again until January. Therefore, it's better for you to let that unit sit empty now, because demand is so much lower for the next 2-3 months you won't be able to get the same increase in lease price as you will when demand skyrockets in January.
Another example is an understanding that some kind of amenity will change over a period. eg, a new public transport route is going in, or the property next door is being rezoned and demolished, from an industrial site to a commercial precinct, and so waiting for that to happen means that you can get a higher price on your lease once that happens, to the extent that it will offset the loss from leaving the unit vacant.
The defendants will argue that the analysis provided by the plaintiff doesn't consider these kinds of business decisions and that this part of the argument should be considered flawed.
One where RealPage gives you a recommended price and you are free to choose whatever price you want. They might ask you something along the lines of "why didnt you use our price?", but nothing is binding. This is like kelly blue book or a price consultant for apartments.
The other is the AutoPilot feature, where RealPage "takes the wheel" and set/publishes the listing price for you based on their model. The property owner is out of the loop, and RealPage is a single entity setting all of the prices for the subscribers.
I think the first case is pretty clearly legal, and the second has some valid concerns.
The point of both services is to help landlords maximize profit, but that isnt illegal by itself.
I couldn’t begin to hazard a guess as to what a share of Apple “should be” worth, but if I do a little electronic research, I now have the advice that “around $190/share” is probably right.
Did I collude just there?
there is also the issue of market concentration. generally speaking in a regular, healthy market many people hold stock and possibly undercut each other. In financial cases where there is actual price fixing going on (e.g. LIBOR) there has been a lot of prosecution.
e.g. take a cartel that you genuinely think is a cartel. Now instead of them all colluding, imagine that they set up Price Advisor LLC, and that no two of them ever talk to each other to set prices. All price setting is done by Price Advisor LLC. Moving the price setting into this LLC does not make the operation not a cartel. The LLC saying it's "checking comparables" does not make it not a cartel. After all, if a legitimate cartel could dodge this by just making a new LLC, then it would almost always make sense to cartelize because you can always act as a cartel without being considered a cartel for the cost of $500.
This is obviously true in many markets where price discovery is easier: Mobile network operators don’t need a service to report on their competitors’ pricing. They know it and somehow a cartel fails to form.
Also to get on a soap-box, this is the truth of reparations, it is not in relation to a single event, it is an attempt to solve injustices that exist institutionally in our world today.
The primary purpose of any and all reparations rhetoric in the US today is to divide the electorate by anything other than economic position in order to maintain a status quo whose legitimacy is beginning to erode. And it's working quite well, since you're delivering grandiose proclamations while advocating for nihilism and ignorance towards the existing legal processes that will actually impact the lives of millions of people in the coming years.
So I don't discount the legal processes, I am saying they must be changed. That is how we can actually solve issues like this, instead of simply putting a band-aid on each time we have systemic issues like this.
I find myself to be an anti-nihilist as a matter of fact. Reparations is not an _ideal_ for which I have grounded in nothingness (nihilism). Reparations must be a state of being for our government, whose material being should be solving injustice and not propagating it.
I would be happy to die for habeas corpus, the right to face your accuser, the right to a trial by jury, freedom from ex post facto expropriation, public trials, the right of appeal, and countless other things which literal wars were fought over for a good 700 years of hammering out common law.
To be ignorant of the protections this brings and the costs its absence imposes is legal nihilism, the focus on a single outcome in the present with no provision for the future.
I hope the prosecutor makes their case well and the jury follows the judge’s instructions and returns a verdict favorable to tenants. But if the prosecutor drops the ball or the jury makes a decision that baffles me, upholding that process is more important to justice than any single outcome.
Many Americans are not only willing to die to uphold this, but part of their job is also to kill in its defense. The pseudo-heidigerian stuff about government having a state of being just reads like you’re gearing yourself up to rationalize imposing your beliefs through nominative positioning.
Punishing landlords for colluding against tenants by forcing them to give back the money is pretty much the opposite of the status quo and about as focused on pure economics as you can get.
Returning some money to some tenants as a one-off and restricting some forms of landlord collusion is about as far as you can get from pure economics or structural reform. Both capital R reparations and reparations as a social justice hobby horse are ultimately intended to preserve and legitimize the existing system, even in their maximalist demands which tend to deflect and discredit more concrete advocacy.
Economics is a vast field with a long history and many possible futures so it's quite sad that the horizon for many people is "american neoliberalism with more regulation and redistribution" or "american neoliberalism with less regulation and redistribution."
I can think of at least three actual opposites of the status quo: one would be a georgist tax that makes holding land speculatively unprofitable, one would be a singapore style nationalization where the government purchases all of the apartment buildings at their tax-assessed rate but allows for a market in 99 year leases, and still a third would be ex post facto arbitrary expropriation without compensation in the style of many communist revolutions.
"Some landlords return .01% to 15% of their last 2-3 years of passive revenue increases and promise to raise rents more arbitrarily" is not a bad thing for those renters, but in terms of economic trends and policy it's quite literally using existing law to _return_ to the status quo.
You’re basically saying that because this violates your code of ethics, it should be punished by the legal system wherever or not they’ve actually broken a law. So the system of laws is meaningless, what’s important is how you feel, and your moral code.
And I get it, we probably all feel this way on some level. But I’m glad society doesn’t operate that way.
There should be no 'punishment' of the landlords truly, I am saying we make a system where landlords can not unjustly profit from us (and I do speak generally here).
Stuff like this is what causes the housing crisis, it must be dealt with systemically, not by giving a few people none-the-wiser a lesser life.
There's for better or worse no law against 'too much profit' in the general case. How would one define 'too much'? A certain margin? That has historically led to merchants increasing their costs so they can profit more in absolute terms once the relative profit cap is met.
Seems like the answer is just to allow more construction and densification, which in turn creates a more competitive market for housing. If they then tried to aggregate, roll-up and collude they would fall under the Sherman act no?
The landlords see their rent prices increase in their checks each month, it is not as if they have not noticed increased profit over the last years due to this.
So if this is allowed, we will start to see increased centralization and then passive acquiescence to gross profit.
Define 'exceedingly.'
> So if this is allowed, we will start to see increased centralization and then passive acquiescence to gross profit.
The market is already fairly efficient, except where laws like rent control forbid market efficiency.
The issue is that while demand exceeds supply of housing in metro areas, the cost to acquire/rent will tend towards the maximum amount a renter/buyer can bear. On the other hand, when supply exceeds demand, it tends towards the cost of construction.
This software just makes the market more efficient in the same direction it was already heading.
More houses solves this. Suing the pricing tool for existing does not.
Well no, they're going up because there's not enough houses near the jobs. Studies show the US is short 2-6,000,000 homes. Until that changes, prices will only keep going up. The centralization here is making it move faster than it otherwise would but the bounds and direction remain unchanged.
Please translate "fairly efficient" into percentage terms. Also, what instrument are you using to perform your measurements?
Coming in and harassing people for definitions and quoting economics 101 while ignoring the empirical evidence isn't a good way to discuss an issue.
The system very often doesn't actually support that in fact, so I don't find it a particularly compelling argument.
Sometimes systems suck from the get go, sometimes they degrade over time. Some of us are getting tired of the heads I win tails you lose "democracy" magic show, and the runtime we are in supports recourse outside of the "agreed upon" (wink wink) legal conventions, and I suspect it is more of a coordination problem than a consensus or will problem.
What if I create software that recommends rates to charge, and I market it. Proven to get you up to 20% or more extra rental income! Then everyone just happens to use my software, and the rates are then 'recommended' to everyone based on an analysis of what the market will bear. No collusion. Is a law broken in this case? Or is the market just lacking in competition.
The software isn't making landlords do anything, it's recommending an optimal market price. Is it any different than a quote from a commodities futures exchange being used to price corn at the local grocery store?
Commodities exchanges (I believe) work on a competitive bidding system, which is basically the opposite - you have willing buyers and sellers with roughly equal power/information.
How is a Zestimate or Redfin home value estimate legal then? Or a Redfin rental estimate? [1] Would it become illegal - or a cartel - if too many people started using it to set rents?
Should we forbid tools to help landlords figure out how much their places should rent for?
[1] https://www.redfin.com/rental-estimate
> Should we forbid tools to help landlords figure out how much their places should rent for?
It depends? Playing moneyball (i.e. charging the maximum the market will bear without a serious, violent response) with a necessity like rent should be illegal, and many of these tools seem designed to do that using market power, which is explicitly illegal. If the tool just gave some local averages based on things like amenities, that might be ok.
knowing what it does, yes that is collusion. Look at the etymology of the word: it literally means 'playing together'. It doesn't require people to meet up in a smoke filled room in supervillain outfits and say 'let's collude, heh heh heh'. Everyone is sharing their rental data to help the software calculate the optimal price, and everyone wants to get extra rental income, per your scenario. The diffrence from the commodity exchange is that exchange operators are not promising specific price outcomes for commodities.
Funny how feelings are brought up and mocked when it’s about the disenfranchised. Meanwhile, the ruling elite gets their fee fees hurt by socialists and it’s how it should be.
Strange, isn’t it?
Remember, every major group had injustices committed against them at one point and by them at one point.
It’s a well-meaning idea that’s proven stupid by even elementary school math. Anyone who suggests it is clearly incapable of rational though.
And saying that people who argue for reparations are incapable of rational thought is quite rude.
https://news.ycombinator.com/item?id=38297746
This has become a painfully, utterly common trope on Hacker News.
The Sherman Anti-Trust act is one paragraph long.
It doesn't attract the same spirited interest from judges as the constitutional amendments do, which are even shorter. Judges and Justices have been writing the law on those for a long, long time, including reversing their own precedents, "ignoring" case law - really just fucking disagreeing with the past. To hell with case law.
> underlying behavior seems really objectionable and should be illegal
This is what matters. At the end of the day, if the government wants to win these cases, it's not going to be by making RealPage look bad - one kind of tomfoolery - or by stare decisis - another kind of tomfoolery. Judges and Justices are writing anti-trust law.
So give them some good fucking propaganda. Make them give a single utter fuck about something as utterly god damned dull as this. Align it with their political opinions, because that is what decides these cases.
The same thing is true about the Google case. The FTC doesn't even care about advertising. The DoJ doesn't care about apartment pricing. The underlying problem is that the people litigating this have no passion about the thing whatsoever, they are way too big picture "company bad" and don't have much else to go on.
These things are explicitly listed as illegal:
* conspiring in restraint of trade
* price discrimination between different purchasers if such a discrimination substantially lessens competition
* sales on the condition that the buyer or lessee not deal with the competitors of the seller or lessor
* mergers and acquisitions where the effect may substantially lessen competition
The entire point of the event was to ensure incoming data to the salary aggregation company was sound.
They wait 2-4 months for a report / dstabase and they can now lookup industry salary by level and function. Its super accurate because they all go together beforehand to ensure that!
Id be shocked if the same thing wasnt happening here. No need to collude / conspire on actual offers when you already have super accurate aggregate pricing information, you already know what your competitors are going to be asking for like properties, price a little up or down.
What made a difference in cases like the Silicon Valley anti-poaching regime was direct anti-competitive action: Hiring away Apple Engineer A would be good for me, but I won’t because I’ll get an angry phone call from Steve Jobs and face potential retribution.
The crux of a case like this is whether RealPage was merely facilitating market-making price discovery (good all on its own for maximizing landlord profits—legally!) or was explicitly or implicitly creating incentives for landlords to act against their individual interest in favor of the collective interest.
That is just about a textbook case.
You can remove the software. Imagine you all pay someone to write a number on a piece of paper that gets posted on a light pole once a month. You don't get a say what the number is, but you all agree to set prices at that number 80% of the time.
This is illegal. Even if you remove the 80% and say "we recommend you use this number 80% of the time to maximize your non competition", it would be illegal
This is not a close case. Fixing the price this way is illegal. Agreeing not to compete at all is illegal. It does not matter if you get someone else to set the price. At the point you all agree not to compete, you've clearly violated the act.
As for whether it's per-se illegal, per-se illegal went out the window on basically all illegal acts under the sherman act over the past few decades, except a few remaining forms of price-fixing.
But you would still win the cases under the rule of reason anyway, and it would not be close there either.
People seem really hung up on whether they agreed with each other explicitly.
They don't have to. Conspiracy suffices. Tacit agreement is not illegal, but it has to be truly tacit. This is not. As I said elsewhere: it is illegal for them to conspire to not compete matter what the form of the conspiracy.
However if they just aren't competing, you can't order them to compete.
This is a clear case of the former - they are conspiring towards a common non competition goal. They knew what would happen if they conspired this way.
It's like trying to avoid a conspiracy to commit murder charge by saying you never explicitly agreed to hire a particular hitman, you instead just followed the directions some software gave you when it said "in order to maximize the possibility of your husband being dead, we recommend depositing at least five million at the following address". Good luck with your claim that you didn't agree to anything with anyone - you were just maximizing some probabilities.
Hell, i bet when they do discovery the company has not been as careful as they think, and there are chats/emails about how successfully they've been able to destroy competition or raise prices or whatever. Because there always is.
The Sherman Antitrust Act seems to deal with interstate commerce. Clearly the software is sold in many states. Some rental markets are multi-state. Some apartment management companies are multi-state. Would it apply to those rental markets and management companies that are not interstate?
So, you don't even have to participate in commerce for your actions to be considered "interstate commerce," much less participate in an actual interstate commerce.
I'm confident the number of lawyers with pointer analysis expertise in this world can be counted on the fingers of one hand... probably even after a gruesome lawnmower accident.
Maybe it'll all work out.
Also, your example for the hitman would make a great half-serious murder comedy movie
I don't know whether it was RealPage being used, but when I was leaving my apartment outside of D.C., I wanted to extend my lease by 3 months, into December. A very normal occurrence.
I went to the leasing office and asked to extend. We sat down and they typed some info into the computer. They said I could get the lease extension for 50% more than my current rate per month.
This seemed ludicrous so I asked why it was so expensive. They calmly explained about the new software they were using which set the rates for all new leases, which they were not authorized to override. They said the increased cost was due to the very large new building which went up a couple blocks away. Not owned by the same company. The building had been completed around December the year before. Many tenants were expected to be leaving around that time when their 1-year lease was up.
I couldn't believe this could be legal and asked the agent how this was legal to collude with another building. He said it sure seemed odd but all of the buildings in this city had just started using this software. This was just some guy working in a leasing office but he claimed it was because the boom in high-rise apartments in the city had created too much competition and the owners had all agreed to use this software to fix that.
Eventually, after some back-and-forth, I learned that changing my lease end date by a couple days reduced the rent increase from 50% to 5%. So I ended up with a 3 month and 6 day extension.
It's insane, and toxic.
Meanwhile, the tenant has to pay more money to move than it costs the landlord to rent the place again. The landlord knows they so they offer an extension at an increase of about the same amount it would cost to move.
They are betting they can do absolutely nothing and make more money. Even if they lose that bet, they still make more money.
There is zero downside when there is high demand for housing and other landlords are doing the same thing.
Lots of uneven sectors where huge portions of individuals loose to "market forces".
The system is beyond broken when an increase in the supply of housing by a competitor results in higher prices for everybody.
However, landlord advocates spread the counter narrative, of people mistaking symptom for cause, and unsophisticated public laps it up. People hate to see change and want to blame new buildings for high prices, even though they lower them universally.
The only way to fix this is to drastically incentivize building to the point that supply is higher than demand.
Mostly agree with your comment though!
Vacancy should be up close to 10%, IMHO, with anything below 5% considered a dire crisis that needs immediate fixing.
Please share. Remember, prices are at the intersection of supply and demand, and moving one curve will inevitably affect the other.
But this newer paper is far more comprehensive on far more topics. IMHO it's far too charitable to some really bad and research with highly biased and methods (e.g. Damiano) but it still does point out the flaws there.
https://furmancenter.org/files/Supply_Skepticism_-_Final.pdf
Unfortunately this review does not cover the spate of papers in the 2020s that I was originally thinking of, so I'll see if I can dig that up still.
I'd argue that most people in the US don't want to live next to giant apartment complexes, even if they themselves already live in one. People like sun, and skylines, and space. An attractive, well maintained apartment building that has parking for all it's residents in an area that's not too crowded doesn't have to hurt the neighborhood, but it's not going to make it more desirable. At best it just accommodates the people who already want to live there.
Rent homogenization software is doing the same thing realtor associations have done for years -- offer incentives to users who hold the line on "standard" pricing and penalizing those that don't.
Then wrap the above scheme up in something more convoluted so it doesn't immediately look like collusion.
(Boston.)
BTW, more recently I saw the same thing with large contractor companies. One quoted me an insane price for something and I asked why, and they replied that it's the price that the software (ServiceTitan) tells them to charge, and even showed me their screen.
Again, they said ServiceTitan decides the price depending on "the average price of other companies in the area" which is code word for you-know-what.
Why doesn't someone just build a new building? Mostly they will be blocked by NIMBYism. NIMBYism is a near universal philsophy, to the point that renters who would benefit from this are typically NIMBYs too. Sometimes they're the loudest NIMBYs, It will be pretty much impossible to build anything new until the state takes control of building away from localities and forces them to allow building.
The software has completely ruined the market here and every leasing agent pretty much says "I have no control over this, if you see a lower price apply to lock it in but other than that the algorithm sets all the pricing. I can't modify it."
It is very obvious that all these buildings are colluding with each other to price their leases. It's pretty much a simple positive feedback loop of increases. Since everyone is raising their prices, the consumer has no choice but to pay the high price. Even smaller buildings who don't use this software, look at the prices set by it and use it to set their own pricing.
I think the conduct is egregious and clearly illegal. If this was one building using it, it wouldn't be. But when almost every building uses it, it clearly creates a monopolistic market
* Make very stiff penalties for accepting anything besides a 12 month lease, EXCEPT when the renewal date falls outside of a designated 2 month period.
* Set this 2 month period to coincide or overlap with the same renewal period every other major player in your housing market uses.
* For any lease renewing outside that 2 month period, change up the optimum price point you offered to be a slightly shorter or longer lease period. This will shift tenants into the desired renewal period within a few years and you'll benefit even if they switch buildings in the long run, as long as most other buildings are doing this too.
* Add very strong penalties for lease-breaking, including such tactics as charging as much as 135% of the monthly rate for every month remaining on the lease. Unless they re-rent the building, and then the fee is 135% - whatever they get for rent for that period (hint: want a cheap apartment for your employees? Use the lease breaker apartment and charge them the difference!)
* Add the same 135% increase for the post-lease month-to-month period to force any renewals to make their decision quickly during that renewal period.
Get enough major players to do the same in the same area, and you have:
* Artificially increased demand during that designated 2 month period when everyone in the area renews.
* Artificially constricted supply during the same period, as renters won't release their current place until they've found a new one.
* Ensured that any newcomers to the area will get locked into the same renewal cycle within a few years at the most.
Even if they leave your complex, as long as you've shifted their renewal cycle you will benefit in the long term. There's one less apartment available for rent and one more apartment seeker looking for a place during the same period that most others are looking.
This is one of the major causes of housing inflation. Also, homelessness as people get priced out of the housing market.
A lot of other things go into the reasons we're seeing 5-10%+/year rent increases when the population only increases 0.5%. Way too many of them come down to exploitative wealth extraction by multistate or multinational corporations. This wealth does NOT flow back into your community.
If you start at an EVEN distribution of renewal dates right now (it's unlikely but for argument):
After 1 year: 33% renewing in the same 2-month period
After 2 years: 50%
After 3 years: 66%
After 4 years: 83%
After 5 years: 99%
The actual distribution is going to be less than that 99% due to a lot of other factors. Such as only 80% of the leases following this same practice, and move-in/move-out pressure in an area. But the impact of this behavior will still be seen.
This practice is price fixing.
quick code:
* The software company won't have nearly enough money to be a viable defendant.
* Each victim won't have lost enough to sue by themself, unless the violation allows a large multiple of damages. Their harm is (guessing) 15% of rent or a year. Even a $2.5K/month apartment doesn't add up to enough to pay a lawyer.
Can a class action combine such a wide variety of plaintiffs and wide variety of defendants? Could it be nationwide or state by state?
Corporate death penalty seems warranted, both to end the behavior and to send a stern warning to anyone else who might try it again. Victims (read: millions of renters) will never be made whole, but at least you stop more people from being victimized.
Housing and apartments are in many senses artificially expensive. Existing laws and regulations make it very difficult to build, appreciating the value of land and buildings. If people want lower rents - making it far easier to build is one of the best solutions.