Companies formed cartel to keep American rent prices high, lawsuit alleges

NASHVILLE, Tenn. (WZTV) — Aclass action lawsuitin multiple states accuses some of the nation's largest leasing companies of colluding with a third party to keep rent prices high.

The companies listed in the lawsuits include Mid-America Apartment Communities, which is based out of Germantown, Tennessee, and is described as the "tenth largest manager of multifamily rental real estate in the United States, with over 100,000 multifamily units under management in 16 states." The lawsuit adds it is believed the company earns over $1 billion in revenue per year.

Other companies being sued include RealPage Inc., Greystar Real Estate Partners, Lincoln Property Management, Avenue5 Residential, Equity Residential, Essex Property Trust, Thrive Communities Management and Security Properties.

At the center of the allegations made in the suit is RealPage. The lawsuit states that until 2016, the companies (described as "Lessors") were trying to gain a renters business by offering attractive prices. This created competition because when "one Lessor lowers its rents while the others don’t, then that Lessor would outperform its competitors. As a result, Lessors tended to charge competitive rents."

However, in 2016 and perhaps earlier, the suit claims "Lessors replaced their independent pricing and supply decisions with collusion. Lessors agreed to use a common third party that collected real-time pricing and supply levels, and then used that data to make unit-specific pricing and supply recommendations. Lessors also agreed to follow these recommendations, with the understanding that competing Lessors would do the same."

That third party is RealPage, which the suit claims allowed for the formation of a cartel where the companies could "collude and avoid competition, increasing lease prices to Plaintiffs and other members of the proposed Class."

The suit adds "RealPage openly boasts that its services “balance supply and demand to maximize [Lessors’] revenue growth.” And that is precisely what RealPage has done, facilitating an agreement among participating Lessors not to compete on price, and allowing Lessors to coordinate both pricing and supply through two mutually reinforcing mechanisms in furtherance of their agreed aim of suppressing price competition for multifamily residential real estate leases."

While companies could opt to take their own actions, the suit claims 90% of their clients stay on the same page and adhere to recommendations.

The suit also claims RealPage gives companies information which helps them to "stagger" lease renewals to avoid oversupply in the market, keeping prices higher.

In a nutshell, the suit claims companies had "mutual assurances" they wouldn't undercut each other by using RealPage's algorithm, agreed to give RealPage their lease data, and follow RealPage's recommendations to create a monopoly. "In plain terms, RealPage concedes that its coordinated algorithmic pricing allows Lessors to obtain the same results as a single seller or monopolist-an outcome Lessors “would not otherwise be able to achieve” without RealPage’s pricing and assurances of Lessors’ discipline to that pricing," the suit states.

The suit alleges RealPage and the companies violated the Sherman Act Agreement and created a cartel which caused renters to suffer, calling for a jury trial to hear the class action suit.

You can read the full lawsuit below orclick here.