The FTC does not consider this type of open signaling to be price fixing:
> Q: Our company monitors competitors' ads, and we sometimes offer to match special discounts or sales incentives for consumers. Is this a problem?
> A: No. Matching competitors' pricing may be good business, and occurs often in highly competitive markets. Each company is free to set its own prices, and it may charge the same price as its competitors as long as the decision was not based on any agreement or coordination with a competitor.
Source: https://www.ftc.gov/advice-guidance/competition-guidance/gui...
CostCow will have product 0ICU812a
WalWart will have product 0ICU812b
Then they don't have to actually price match because they are "different products"
this is very different from, "leasing agent, set this high price or get fired by your employer."
'Cartel/Corporate' owners own ~70% of the units in Seattle. 11 total companies (big names you should know like gray star and equity residential), to the one they all use realpage. That's 70% of the market price fixed, MINIMUM.
The exact quote:
> In one neighborhood in Seattle, ProPublica found, 70% of apartments were overseen by just 10 property managers, every single one of which used pricing software sold by RealPage.
Using your gas station example, a gas station isn't going to look at a competitor selling gas at $4.15 and decide to raise their price to $4.45. They would lower their price to match the competition, otherwise they'd lose sales and make less money. Price fixing would be if both gas stations decided to raise their price to $4.45 at the same time so that customers don't have a choice.
But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal "price signaling" via publicized fares[1] in the global reservations system.
Competitors can converge on a higher price instead of a lower price. It's not just one direction. They just need to do it via public price signaling to stay out of legal trouble.
In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99.
[1] https://www.google.com/search?q=It+is+now+common+for+an+airl....
I don't understand what you're saying. Are you saying that companies are colluding, but not really because the prices are public? Most prices are public, just walk into any supermarket or open Amazon.com and you'll see public prices. If a company bases their price on a competitor's price, that's not collusion, that's just a pricing strategy. If a company is able to price a product above their competitors and still succeed (e.g. by investing more in marketing), that's legal too.
> In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99.
Streaming is not an example of a healthy market IMO. I don't know the economics of it all, but I know all the streaming services need to pay the same record labels. Whatever is going on there, it's weird that they all cost the same. I currently pay $10.99/month for Tidal, which is the same exact price as most other services. I wouldn't be surprised if there was collusion going on there, maybe even something like RealPage behind the scenes. There's also the factor of Apple and Google's monopolies over apps, and I wonder if undercutting Apple/Youtube is bad for business.
> But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal "price signaling" via publicized fares[1] in the global reservations system.
The link you posted seems to be a google search page? Not sure what you meant by that.
Yes, but it also runs counter to the idea that free markets tend to drive prices down through competition. In reality, 1 of 2 things happens:
a) companies try to differentiate their products enough to not be direct competitors (e.g. exclusive content on streaming platforms, or platform lock-in), and both/all charge more
b) one company buys the other to kill their competition
No one actually lowers their prices to compete anymore, because we abandoned enforcing anti-trust and anti-monopoly laws decades ago.
The point is that the intuitive wisdom that free market competition lowers prices of goods is not now, nor has it ever been the truism that it's postured as, because the businesses within that market have a huge selection of tools and strategies at their disposal to avoid direct competition.
And this makes sense. Why in the world would you subject your business to the unmediated competition of a free market? Yeah, it's totally possible for you to create a product so innately better that you own the market by virtue of that, but that's like... hard. It's way easier to create brand-lock-in to incentivize your existing customers to stay in your "ecosystem," or to create an innovative unique feature and patent it so your competition can't use it, or use snobby/elitist marketing to make your product more enticing to people who seek status, or shit, go the other way, make it humble and down to earth, and appeal to a sense of "genuineness," or tie yourself to patriotism and put flags all over your product, whatever it might be. There's tons of ways you can make people want your thing that have fuck-all to do with the thing.
I think this is a serious fault in how pro-free-market people tend to think, which is this constant positioning of people as rational actors who will choose the best product for their needs, and it's utter nonsense. People buy stuff for stupid reasons constantly.
This is a fantasy. Give two examples of major markets where competition has increased recently.
The US economy has grown what, 4 times since 1990’s but the number of registered companies has fallen by half.
I can imagine simple hypotheticals like:
A. Two companies that compete with one another in each of markets 1, 2, and 3.
B. Three companies, each with a monopoly on a single market.
I know nothing.
In the real world, Cisco, Meta, Amazon, and Microsoft don't make better products to win, they just buy Splunk, Insta, Whole Foods, and Bethesda.
It doesn't take collusion. It's a result of size alone.
the only question is how much profit to put on top and even then they have to be careful as if they go too low their competetors won't follow and then they have to pay extra for an unscheuled delivery just to fill their tank.
i'm reasonable certian that small stations are illegally colluding in some cases.
“Skimmers” (drastically lower-priced diesel stations) are a real threat to larger chain stations. They don’t put them out of business entirely for a number of reasons, but one is because gas stations ultimately sell more than gas/diesel (e.g. a clean bathroom is often worth a few extra cents per gallon for me, but there’s a lot more than that too). Also any given station can’t sell an infinite amount of fuel. Beyond tank capacity, wait times are a real impact on sales volume, and so if a station offers a price too low (even if still profitable), it is just leaving money on the table.
So not to say collusion doesn’t happen, but one can also arrive at similar pricing with a commodity like gas without it. Especially since fuel margins are typically low.
What RealPage does is distinct because it assures prices are always above and by orders of magnitude what they should be. It also achieves that through private communication which I think is generally accepted as a problem.
If I need to make a left turn across traffic or go around the block I'm not topping off at a station just for 5 cents/gal. (Tho, I might make a mental note & use that station when I'm coming down the other way, when it's easy to in & out.)
Los Angeles in particular is crazy. We have the equivalent to micro-climates with fuel prices. Stations a half mile apart can be 30¢ different. Stations a town apart can be 70–80¢ different.
And there are a couple of stations in Beverly Hills adjacent that are ~$2.50 more than the going rate (no surprise there, tho).
- they could also see their competitor raise their price to from $4.00 to $4.15 (for whatever reason) and decide that they can raise their price as well without losing customers.
In gas prices, there's undercutting to draw business -- which seems natural in a free market. That's often smaller, local players who drive this stage, pricing things just below the nearby competition, but players of all sizes are involved.
But sometimes, the price jumps up -- often by a significant margin, and across the board. This is often at the behest of a big player; when company like Exxon Mobil seemingly-arbitrarily raises gas prices in an area, it tends to set a trend. The smaller players tend to raise prices in accordance with this higher baseline and are happy to see the financial relief.
This may seem counterintuitive in a competitive market, but it does happen anyway. And it's all temporary and cyclical, as we've all seen over and over again. Free markets aren't necessarily stable systems that are free of resonance.
But with 4 or more participants, someone will inevitably betray the others out of greed.
Which was the case in this instance. RealPage required subscribers to use their price suggestion some percentage of the time or they'd risk losing their subscription.
So it could be argued it's not
"private prices" + "autoaccept" + "compliance"
But rather
"public prices" + "autoaccept" + "compliance"
Still problematic behavior (and probably add "private knowledge of inventory forecast" on top of that), but I'd argue price signaling of the available inventory isn't the main issue.
RealPage though has information on how many apartments are empty and uses that in algorithms even though it isn't public information.
I added "private prices" as one of the factors because the official DOJ wording in the complaint mentions "nonpublic/confidential/sensitive" prices in 3 different places:
>The complaint alleges that RealPage contracts with competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates
>“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents.
>Landlords agree to share their competitively sensitive data with RealPage in return for pricing recommendations and decisions that are the result of combining and analyzing competitors’ sensitive data. *
I think they’re talking about more sensitive internal numbers. What are the costs and margins on the unit? How quickly are units moving at a certain price? What’s the turnover at particular prices?
I think the core mechanics bear some similarities to insider trading, with a third party “washing” the non-public information.
Yeah that's my understanding of it too "competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates and other lease terms".
I.e. realPage has an oracle view of all the lease ending times etc, so it knows for instance, this next July there's going to be very few availability, so boost all the rents by X%
I guess there's a "private price" if the apartment complex share what, after all negotiations, the renter ended up signing for. It can be more than what was on the public website, if they ended up signing for a shorter lease, or less if the apartment ended up needing to throw in "first month free" etc.
There's also private price of lease renewals done before the unit is put for rent on the website.
The list price is different than the final accepted monthly rate\term for the renter. Realpage is getting the actual rental information.
In addition, the occupancy of the building is also not public data.
Another example would be stock trading apps, especially ones that give you forecasts and estimates as to when to buy and sell.
If not % of rent then I can't understand why the company would want rents to be higher across the board.
The reason is that there is a fundamental principal vs. agent problem in the fee-based property management industry.
Usually an investor buys a building and then hires a separate corporation called a fee-based property management company to manage the property. The management company gets to keep 8-10% of the rents that come in exchange for doing all the management work. (there are situations where the owner and the manager are the same corporation but they are less common and are called owner-operators)
The fee-based management company and the building owner have different interests. The building owner wants to maximize net operating income, which usually means maximizing revenue. The fee based manager wants to maximize their earnings, which is the 8-10% of the rents minus paying for all the management work to happen.
On first glance you might think these are similar interests, but when it comes to choosing the price they are not the same. If a rental price is optimal, it takes a bit of work to rent it out. The housing unit will sit on the market for a little bit and be shown to a lot of people before you find someone willing to pay the price. If, on the other hand, the price is 10% below the optimal price, it will take very little work to rent out and will be taken by the first person who comes to look at it. In this case "little work" means the management company can save money by paying fewer staff members.
So, property owners want optimal prices and property managers want prices that are slightly lower than that.
Revenue management algorithm compliance is a solution to this principal agent problem. The building owner insists on it being used by the management company because he doesnt trust the management company to choose prices. He doesnt trust the management company to choose the price because they are motivated to lower the price in order to reduce their workload.
High price algorithm compliance is important to realpage because it is how the owner makes sure the manager is choosing prices that maximize the owners interests, rather than the management company's interest. And the owner is the person who chooses to enforce the pricing algorithm, and thus the true customer of realpage when it comes to revenue management algorithms.
Very interesting - I can't find anything about this on their website, but assuming that is the case I feel like this is the only explanation so far in this thread that makes sense. Other explanations in this thread (marketing, optimizing for all the customers) fall short to me because (as far as I can tell) there is no reward / punishment mechanism.
This is not to say that the effect isn't the same though, driving prices up. And the other quotes from internal documents certainly hint that there might have been some awareness of this as well.
Rental prices in the USA keep going up primarily due to a housing shortage.
Revenue optimization algorithms like realpage's do genuinely increase rents by about 2-5%, because without them fee-based property managers lower rents below market-clearing price in order to make it easier on themselves.
The increased rent that comes from using these algorithms is, in my opinion, not really anti-competitive. If you only used public information for the pricing algorithm, you'd get largely the same prices out of the system. In almost all rental markets, algorithmic pricing of any sort doesn't have high enough market share to see success by anticompetitive price-fixing, since most suppliers of housing don't use it.
Apartment rents are crazy high because there simply isnt enough housing, and we dont let people build enough dense housing near jobs. Going after Realpage, or blackrock, or landlords, or AirBnB is just trying to find a scapegoat, when the hard truth is we need to let people build more housing near where the jobs are.
I suppose only time will tell.
We don't know how many housing units use Realpage pricing algorithms in 2024, but in 2017 when Realpage bought the tech, it was being used in 1.5 million rentals (https://www.realpage.com/news/realpage-to-acquire-lease-rent...) and there were 43 million rentals in the US, which means nationally they had less than 4% marketshare.
Obviously, cartel behavior (raising prices above market) does not work if you have 4% of the market. Perhaps their sales have gone up 20X in 7 years and they have enough market power for cartel behavior (doubtful)? Perhaps they have a low marketshare nationally, but they have a high marketshare in a few specific markets? Maybe, lets see what the DoJ says.
It’s like complaining about a monopoly on lawn mowing. Owners can always choose to mow their own lawns if they don’t like the cost of hiring it out.
https://www.skadden.com/insights/publications/2023/04/quarte...
I think it's very much this. National market share is meaningless. I live in Northern Virginia -- some SFH that rents in another market is meaningless for someone looking for an apartment here. In this area, it seems very much that all large multi-unit apartment buildings use RealPage. Individually owned condos that are rented out exist, but of course their quantity is very tiny compared to the number of apartment towers/complexes. SFHs, likewise, are poor substitutes, because someone in the price range of a studio, 1 or 2 bedroom unit isn't going to rent a SFH and splitting a SFH brings problems of its own.
They’re also super glib about it online https://www.realpage.com/analytics/phoenix-apartment-rent-gr...
IMHO automated price raising should be considered problematic or at least suspicious.
Corporate landlords use RealPage in Austin, Minneapolis yet rents fall there because of supply of new housing.
RealPage does impact rental prices, but only marginally, and the real impact to prices is from supply constraint + demand.
If there is enough supply, any realpage algorithm wont matter much because of market forces. Market forces trump everything
Unless a certain company interferes with market forces — aka the whole purpose of this lawsuit.
If you need a place to live, what’re you going to do, be homeless? They have enough of the market in some cities to impact the market in a way that distorts the prices for everyone. Market forces cannot operate when companies act anticompetitively
even if realpage disappears overnight, rent prices wont fall because the new construction is outlawed by the NIMBYs.
fix new construction via zoning reform if you want to actually help people
People aren't pool balls bouncing around on a table they are fully capable of serving their interests.
Its weird to argue against the obvious conclusion that price fixing increases price
I was under the impression this was quite common, though I have no evidence and would love to be shown otherwise!
Suppose that you're a big landlord in some area, such that your submitted prices can affect rents for that property type across the area. You might be tempted to submit high prices, wait for your competitors to follow suit, and then reduce your actual rents to undercut them. They (the competitors) naturally wouldn't be happy with this. So RealPage has to be able to show people that they know their numbers are the actual ones.
Forcing compliance ensures all of RealPage's customers get to raise their rents while retaining their renters, which means landlords are making a safe bet when using RealPage-- and the only downside is real people paying higher rent.
Cartels generally don't tolerate a cartel member undercutting their prices. Cartels are effectively in a prisoner's dilemma situation:
* If no one defects (i.e. everyone sticks to the cartel price), the cartel members get the highest price, and get the most profits. * If one party defects and goes slightly below the cartel price, while everyone else stays loyal to the cartel pricing, the defecting party gets the most business at a price only slightly below the cartel price, and makes lots of profit. * If all parties defect, there is no cartel any more, and profits are reduced.
So cartel members do not want other cartel members to defect. Cartel organisers get paid because the value of the cartel is only there if defection (i.e. not sticking to the cartel price) is controlled - so it is also in the interest of the organisers to prevent this.
I think the "private prices" + "autoaccept" + "compliance" is the key misbehavior that gets RealPage into legal trouble.
If competitors want to converge on prices in a legal manner, they have to do out in the open via "price signaling" via public posting of prices. That's how it's legally possible for competitors in other industries to do it:
- gas stations looking at each others signs of prices and quickly adjusting to match;
- e-auctions like Ebay/Reverb showing a seller what the previous range of sold prices were;
- Kelly "Blue Book" showing current used car market prices
- Zillow publicly showing rental rates, etc.
Neither the platform nor the sellers in those examples get in trouble for "price fixing".
In contrast, the privately shared pricing with compliance monitoring by the platform is too coordinated to avoid legal scrutiny.