On March 1, 2024, citing the “tremendous practical importance” of judicial treatment of the use of algorithms in price fixing, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) filed a joint Statement of Interest in Duffy v. Yardi Systems, Inc., et al., an industry related antitrust lawsuit challenging the use of algorithms and revenue management software.
The agencies’ joint statement underscored the government’s argument that algorithmic price fixing is a violation of the Sherman Act, “even if the landlords retain some authority to deviate from the algorithm’s recommendations.” The statement of interest was expected, as DOJ previously expressed its “strong interest” in the correct application of antitrust laws in In Re RealPage, another lawsuit challenging the use of algorithms and revenue management software in the rental housing industry.
To further drive its arguments home, the FTC released concurrent business guidance on the use of algorithms to housing providers. The FTC’s message to housing providers was loud and clear: “Landlords and property managers can’t collude on rental pricing.” The guidance further advised housing providers that their “algorithm can’t do anything that would be illegal if done by a real person.”
The FTC’s business guidance states that algorithmic price fixing is still price fixing and highlights the following key aspects of competition law:
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Operators cannot use an algorithm to evade the law banning price-fixing agreements. Elaborating on this point, the FTC states that using software that “combines competitor data and spits out the suggested maximized rent” is illegal.
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An agreement to use shared pricing recommendations, lists, calculations or algorithms can still be unlawful even where co-conspirators retain some pricing discretion or cheat on the agreement. On this point, the FTC states that setting initial starting prices can be illegal, even if operators deviate from the recommended prices.
The FTC notes that the housing industry is not the only industry under scrutiny for potential illegal collusive algorithms, citing challenges brought against meat processing competitors, hotels and casinos.
The FTC's latest business guidance adds to the growing pressure on the rental housing industry. From challenges related to what has been coined as “junk fees” to the FCC's proposed ban on bulk billing arrangements, the rental housing industry is under increased scrutiny.
The National Apartment Association (NAA) encourages its members to work closely with their risk management teams and local counsel to ensure their operations comply with all federal, state and local laws. NAA remains vigilant in monitoring the legislative and legal challenges regarding industry-related antitrust matters.
To learn more about the FTC’s recent guidance, please contact Ayiesha Beverly, NAA’s General Counsel.