There was a lot of work to be done for illegal price fixing. In the mid-1990s, to determine the price of lysine as a feed additive, executives from some of the world’s largest agribusinesses had to spend hours on airplanes flying to resorts where they spent days in conference rooms deciding how much lysine each company could sell, and At what price?
Now there is an app for such things.
Department of Justice Alleged in a civil antitrust lawsuit The Aug. 23 filing revealed that a Texas company called RealPage is orchestrating what amounts to a nationwide apartment cartel by convincing major landlords to use its software to determine the prices of millions of apartments across the country. realpage Boasting and marketing its software That it increases the rent by 3 percent to 7 percent.
case Important because it highlights the growing use of algorithms to set prices — and the perceived competition to coordinate at the expense of their customers using the same price-setting formula. The suit is part of a broader effort by the nation’s antitrust enforcers to clamp down on the methods modern corporations are using to squeeze their customers — in this case, by driving up the cost of housing, the most expensive part of American life.
“We’re seeing these types of technologies emerge throughout our economy,” Jonathan Cantor, assistant attorney general for antitrust, said in an interview. Technology, he said, “in terms of putting together a cartel, which was inherently difficult to do, is actually making it easier and more effective.”
Algorithms are also changing implementation. In the 1990s, the government needed an informant — or, in Hollywood retelling, “Informant!” — to break the lysine cartel. RealPage’s complaint, by contrast, is based on the work of a recently created team of Justice Department computer analysts who teased out the workings of the company’s algorithms by painstakingly testing its code.
What the team found, Sarkar says, is that RealPage calculates target prices for individual apartments using proprietary data from its clients and then urges clients to use those prices by arguing that if everyone cooperates, everyone wins.
The complaint quotes a RealPage executive as explaining, “Everybody trying to essentially compete against each other is better which really holds the entire industry down.” This may be true, as long as one is interested in the betterment of the landlords. However, society as a whole benefits more when firms are forced to participate in fierce competition. Their pain is our gain. In the apartment business, that means rents will rise more slowly — or even fall.
RealPage, for its part, says its software was “intentionally designed to be legally compliant.” A key part of the company’s argument is that it provides advice to homeowners, who do not have to accept its recommendations. Instead of coordinating with other landlords to make it possible for them to do so, the company sees its role as advising landlords that apartments can be rented at higher prices.
The tech industry has made a lot of money in recent decades by convincing courts and regulators that business conducted by algorithms should not be subject to established rules and restrictions. Uber, for example, has built an empire on the claim that an algorithmic taxi dispatch service is different from a taxi dispatch service. Google has won a series of legal victories, including A Supreme Court case last yearArguing that algorithmic search results differ from editorial choices made by humans.
The RealPage case is an important reassertion of the principle that algorithms are just a way for people to make decisions — and that they are held accountable for those decisions.
This can be described as the “guy named bob” rule.
In a 2017 speech, Maureen Ohlhausen, then Acting Chair of the Federal Trade Commission, Proposed That antitrust regulators should replace the word “algorithm” with “Bob” to evaluate the use of computer formulas.
“Is it OK for a guy named Bob to collect confidential pricing strategy information from all market participants and then tell everyone what he should price? If it’s not okay for a person named Bob to do it, it’s probably not okay for an algorithm to do it either,” she said.
Even the rise of algorithms has not changed the basic reality that price fixing is easy in concentrated markets. RealPage can orchestrate pricing because ownership of large apartment buildings in major markets is increasingly dominated by the same handful of large national landlords. District of Columbia, which filed His own antitrust suit Against RealPage, an estimated 60 percent of units in large apartment buildings in the city are managed by RealPage clients — and a staggering 90 percent of such units in the metro area.
One reason cartels have historically been difficult to maintain is that new firms can enter the market by undercutting allies. But RealPage and its clients have been sheltered from competition by the difficulty of building housing in big cities.
In the 1990s, a few years before the Lysine case, the Justice Department charged eight of the nation’s largest airlines with colluding to fix airfares. they Agreed to stop. But today, there are only four major airlines, making it easy for carriers to coordinate prices without meeting in a hotel room or plugging into an algorithm.
RealPage’s success, built on market dominance of the largest landlords, should be taken as evidence that they have amassed considerable power. Ending algorithmic price fixing is an essential first step in checking that power. But if big landlords continue to expand, the outcome of the RealPage case won’t matter either.
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