WASHINGTON — The Justice Department filed an antitrust lawsuit Friday against real estate software company RealPage Inc., accusing it of an illegal scheme that allows landlords to coordinate to hike rental prices.

The lawsuit, filed alongside attorneys general in states including North Carolina and California, alleges the company is violating antitrust laws through its algorithm that landlords use to get recommended rental prices for apartments.

The algorithm allows landlords to align their prices and avoid competition that would otherwise keep rents down, Justice Department officials said. The complaint quotes one RealPage executive as saying “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”

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Attorney General Condemns Rent-Hiking Scheme

In a statement, Attorney General Merrick Garland said, “Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law.”

Attorneys general in several states have separately sued RealPage alleging an illegal price-fixing scheme over its algorithmic pricing software.

In a statement, RealPage said the Justice Department’s claims were “devoid of merit and will do nothing to make housing more affordable.”

“We are disappointed that, after multiple years of education and cooperation on the antitrust matters concerning RealPage, the DOJ has chosen this moment to pursue a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years,” the company said.

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RealPage’s Unique Data Sharing Practices Under Scrutiny

The use of data to help property managers set their rents isn’t new or, on its face, illegal. But state prosecutors argue that RealPage is different. According to lawsuits filed in the past year by the attorneys general for Arizona and Washington, D.C., RealPage doesn’t just use publicly available data — it uses confidential data that RealPage’s clients have agreed to privately share to help RealPage’s software to determine the highest price.

That amounts to cartel-like illegal price collusion, prosecutors say. Only this time, instead of cartel members meeting inside a proverbial “smoke-filled room,” the price-fixing is done by AI, they say.

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RealPage came under scrutiny after a 2022 ProPublica investigation into the company’s practice suggested that it could be to blame for some of the rapid increases in housing costs. Since then, RealPage has drawn the ire of Democratic lawmakers, including Sen. Amy Klobuchar, who in February introduced a bill to bar companies from using algorithms to collude and fix prices.

And last week, in a speech in Raleigh, North Carolina, Democratic presidential nominee Vice President Kamala Harris pledged to crack down on “corporate landlords (who) collude with each other to set artificially high rental prices (by) using algorithms and price-fixing software.”

The case is the latest example of the Biden administration’s aggressive antitrust enforcement.

The Justice Department sued Apple in March and in May announced a sweeping lawsuit against Ticketmaster and its owner, Live Nation Entertainment. Antitrust enforcers have also opened investigations into the roles Microsoft, Nvidia and OpenAI have played in the artificial intelligence boom.