Robbing a bank is easy. Getting away with it is the hard part. Most bank robbers are caught the same day because there are numerous cameras that blanket the interior and exterior of the buildings, the police are alerted while the crime is still in progress, and most robberies are committed during daylight hours. It is well known that law enforcement will throw everything they have at catching bank robbers. As a result, few people get away scot-free and the rest are obligated to change their mailing address to a federal penitentiary for the next decade or two. Thus, bank robbery has become an uncommon crime. The risk just isn’t worth the potential reward.
Price-fixing, on the other hand, is a lot easier to get away with. Like bank robbery, entering into a price-fixing conspiracy is a criminal act. Those convicted of the crime face up to 10 years in prison and a $1 million fine for individuals. For corporations, the fine can be as much as $100 million. But unlike bank robbery, a price-fixing conspiracy is difficult to detect. Oftentimes, when competing businesses illegally coordinate on prices, it looks the same as when they adjust prices in response to market pressures. It’s hard for outsiders, even antitrust enforcers, to know if something more nefarious is going on.
To deter businesses from entering into price-fixing schemes in the first place, antitrust enforcers must be more diligent in detecting and investigating markets that maintain unexplainable supracompetitive prices. And in cases where collusion is discovered, the businesses and their executives must face the consequences. Otherwise, this highway robbery will continue.
RealPage and Landlords: The New Robber Barons
This phenomenon is exemplified by a big price-fixing case that has been in the news recently involving RealPage, a company that sells commercial revenue management software to landlords who own and manage apartment buildings and other multifamily housing. In August, the DOJ and eight states brought an antitrust action against RealPage for, among other things, conspiring with landlords to raise prices for rental units. More particularly, the government alleges that RealPage’s software takes “nonpublic, material, and granular rental data” from competing landlords, combines the data, and feeds it into RealPage’s algorithm. The algorithm then makes pricing recommendations to landlords and, unsurprisingly, is constantly pushing rents higher and higher across the board.
The DOJ’s action joins other cases making similar allegations against RealPage, including one that was brought by the District of Columbia in November 2023, and another brought by the State of Arizona in February 2024. There have also been multiple class actions filed by renters.
The DOJ’s complaint included a striking amount of detail about the landlords’ bad acts. Most of the alleged facts centered on the algorithmic collusion between RealPage and the landlords. But the DOJ didn’t stop there. They had an entire section dedicated to explaining how the landlords coordinated amongst themselves outside of RealPage’s software. This section was titled: “Coordination among competing landlords is a feature of this industry.” According to the DOJ, “[t]here is significant concentration among landlords in local markets, and these landlords engage in widespread, regular communications with one another.”
Keep in mind, we aren’t talking about mom-and-pop landlords. We’re talking about large businesses in markets where five or fewer landlords manage more than 50 percent of multifamily housing units in those areas. Through weekly phone calls, emails, and in-person meetings, the landlords shared a variety of sensitive information with their direct competitors, including “nonpublic information about inquiries by prospective renters, occupancy, and rents.” Some competing landlords even set up shared Google Docs so they could more easily share such information with each other. In other words, they weren’t meeting in smoke-filled back rooms, whispering their plans in the dead of night. They did it openly in the light of day.
The landlords’ classic price-fixing conduct is above and beyond those allegations made against RealPage. It boggles the mind that the landlords could be so blasé about breaking the law. Did they not have lawyers advising them? Had they never heard of other price-fixing cases such as the Electrical Machinery Industry case from 1960 where seven executives went to prison? In that case, in addition to fines, the companies in the conspiracy had to pay customers three times the amount of the overcharge. General Electric, for example, paid out $225 million in claims, which equates to more than $2 billion in today’s value.
It’s unlikely the landlords thought this type of coordination was legal. Instead, they did it because they thought they wouldn’t get caught. One must assume that meager enforcement played a role in their decision. Because there have been so few price-fixing cases brought in recent years, the law has little deterrent effect.
And they weren’t wrong. Bearing out the landlord’s hubris, the DOJ didn’t sue the landlords. RealPage is the only named defendant. In contrast, D.C. named 14 landlords and Arizona named 10 landlords as defendants in addition to RealPage. While the landlords in the DOJ case may have agreed to be testifying witnesses and have entered into settlement agreements that have yet to be made public, as a former antitrust enforcer myself, it strikes me as odd. The DOJ’s choice to let the landlords off the hook is likely to embolden executives in other industries to create their own price-fixing cartels. If the RealPage landlords are any example, there appears to be little risk of consequences, even if they somehow get caught.
Deterrence Requires Diligent Enforcement
Criminal statutes are passed not only to punish wrongdoers, but also to deter people from committing the crime in the first place. While the moralistic debates about whether a society should harshly punish some in order to deter others from committing similar crimes is ongoing, we in the U.S. have decided that deterrence is an important aspect of criminal law. According to the National Institute of Justice, our most current theories and empirical understanding of deterrence shows that people aren’t dissuaded by the threat of prison time. Instead, the “certainty of being caught is a vastly more powerful deterrent than the punishment.”
Looking at the landlord’s conduct in this light, it makes a lot more sense. For the past 40 years or so, antitrust enforcers have taken a hands-off approach to antitrust. While prosecuting price-fixing conspiracies has always remained high on the priority list, the government agencies that enforce the antitrust laws have been resource-strapped. Unless they get tipped off, it is very hard to discover the existence of a price-fixing conspiracy. Investigations and prosecutions cost money and take a lot of investigators’ and attorneys’ time. As a result, our antitrust enforcers tend to focus on the easiest cases, those with the lowest hanging fruit.
Gordon Spivack, a former senior Justice Department official and the lead lawyer in the Electric Machinery Industry case, once said, “No one in direct contact with the living reality of business conduct in the United States is unaware of the effect the imprisonment of seven high officials . . . had on conspiratorial price-fixing in many areas of our economy; similar sentences in a few cases each decade would almost completely cleanse our economy of the cancer of collusive price-fixing and the mere prospect of such sentences is itself the strongest available deterrent to such activities.” While Spivack’s point about prison sentences isn’t necessarily true, he wasn’t too far off. We now know that the prospect of getting caught is the strongest deterrent. The DOJ must maintain the legitimacy of that threat.
We should look at the landlords’ conduct as a canary in a coal mine. How many executives in other industries are doing the same thing? We know that prices are going up in industry after industry. We also know that a lot of industries are highly concentrated, and collusion is more likely to happen when there are fewer participants in a market.
In the RealPage case, the landlords shouldn’t get a free pass. They should be used as an example to deter others from even considering illegal price coordination. Moreover, antitrust enforcers must do a better job at identifying, investigating, and prosecuting price-fixing conspiracies. If we want to deter crime, business executives must believe that the risk of getting caught is too great. They have to think that the reward isn’t worth the risk, just like the prospective bank robbers.
According to the DOJ, “RealPage replaces competition with coordination. It substitutes unity for rivalry. It subverts competition and the competitive process. It does so openly and directly—and American renters are left paying the price.” The landlords were and are doing the exact same thing. They too must be held to account.
