On Friday, lawyers at a Seattle law firm filed a class action lawsuit against the makers and users of software that allegedly allows property managers to trade private market data and artificially inflate rents.
One of the users of that software is Portland-based Dalton Management, which, according to its website, owns 10 apartment buildings, with nearly 1,000 total units, in cities across Oregon.
Dalton is accused in the lawsuit of using RENTmaximizer, software marketed by California-based Yardi Systems as a way to automate rental pricing using algorithms. A key part of that algorithm, the lawsuit alleges, is private pricing data obtained by the company from other users of the system.
This, according to a legal complaint filed in U.S. District Court in Western Washington on Sept. 8, is a violation of federal antitrust law banning collusion. “There are no procompetitive justifications for the Defendants’ cartel,” reads the complaint. The lawsuit was previously reported by The Seattle Times.
Dalton Management appears to have been targeted by the lawsuit as a result of a 2016 press release, in which the company’s owner, Jeffrey Denson, said RENTmaximizer has “made Dalton Management better aware of how its properties compare to the rest of the market...now we’re getting $100 more per unit and maintaining occupancy.”
Neither Dalton Management or Denson immediately responded to requests for comment.
On Sep. 11, Yardi posted a statement online defending their software, now known as Revenue IQ. “There is nothing illegal about revenue management, and the allegations in the complaint have no merit. Yardi stands behind Revenue IQ and will vigorously defend this ill-conceived lawsuit,” it reads in part.
The allegations are similar to those levied against another algorithmic pricing software, RealPage, which was the subject of a ProPublica investigation last year. According to this complaint, RENTmaximizer is used to price 8 million units, up to double the number of its competitor.
Last year, a top U.S. Department of Justice prosecutor, Doha Mekki, expressed concern over these algorithms. “Where competitors adopt the same pricing algorithms, our concern is only heightened,” Mekki said. “Several studies have shown that these algorithms can lead to tacit or express collusion in the marketplace, potentially resulting in higher prices, or at a minimum, a softening of competition.”