Residential Real Estate News
Automated Property Pricing Algorithms Bolster Price-Fixing Claims, Say DOJ
On March 28, 2024, the Antitrust Division of the U.S. Department of Justice (DOJ) intervened for the third time recently, backing plaintiffs in class action lawsuits challenging defendants' utilization of pricing software.
The DOJ filed its latest statement of interest in the case of Cornish-Adebiyi v. Caesars Entertainment, Inc., currently before the U.S. District Court for the District of New Jersey. This case alleges a scheme among Atlantic City casino hotels to artificially inflate room prices via a shared software platform employing a pricing algorithm for suggesting rates.
Earlier, the DOJ had issued similar statements in cases contesting the use of RealPage and Yardi software by owners of multifamily apartment buildings to determine rental rates. Despite defendants' claims that they never discussed their choice of pricing software with competitors, let alone conspired to adopt a common pricing platform, the DOJ (with backing from the Federal Trade Commission (FTC) in the Caesars case and the Yardi case) argued that plaintiffs adequately asserted coordinated price fixing. Plaintiffs argued that each defendant relinquished pricing discretion to a shared pricing algorithm.
From the DOJ's standpoint, if plaintiffs allege that a software company extended invitations to multiple competitors to utilize its pricing algorithm and companies knowingly adopt the software with awareness of other competitors doing the same, lack of direct communication among competitors is immaterial. Such conduct alone exposes companies to price-fixing allegations that warrant surviving dismissal motions.
Should courts adopt the DOJ's stance, pricing algorithms employed in online real estate platforms may also face scrutiny from private litigants or antitrust agencies. Businesses utilizing or contemplating algorithmic pricing tools should stay informed about this evolving legal environment and comprehend the associated risks.
