OP-ED
Is RealPage’s algorithm really an antitrust violator?
By Robert Bork Jr.
September 6, 2024
Having failed to pass legislation that would force America’s leading digital companies to open their source codes to foreign competitors and dictatorial regimes, Sen. Amy Klobuchar now has a new brainchild – the Preventing Algorithmic Collusion Act.
Klobuchar charges that companies that feed their data into shared algorithms are actually colluding on price. The villain in this narrative is RealPage, which enables landlords to feed their rental rates and lease terms into its algorithm, which progressives claim ratchets up prices. The Department of Justice, in an antitrust complaint against RealPage, asserts the company’s software short-circuits independent competition “based on pricing, discounts, concessions, lease terms, and other dimensions of apartment leasing.” Voilà, algorithms give you a price conspiracy without those incriminating conversations to wiretap!
If, in fact, Justice’s claim stands up, then perhaps there is an antitrust case, based on consumer welfare, to be made against RealPage. But I doubt it. Market information helps align prices with supply and demand, lowering costs, which usually benefits consumers.
Consider airline tickets. Government regulations and severe restrictions helped along by rent-seeking lobbyists in the 1970s made the cost of flying out of reach for many Americans. Deregulation and more pricing knowledge through the internet dramatically cut costs. Now you can make the airlines compete by price for your business online. Or consider the GasBuddy app, which displays stations’ real-time gasoline prices for drivers.
Regarding real estate, you might be old enough to remember when you had to make a special trip to the courthouse to discover what your neighbor’s house sold for in its last sale, or its valuation on the public tax rolls. Now, sale prices of homes and their estimated market valuation are at everyone’s fingertips – making prices clear to the consumer.
In the digital rental space, apps like apartments.com and Zillow are good examples of how price data serves the consumer. Why shouldn’t landlords have access to the same information? After all, if conditions are right, RealPage could just as easily ratchet prices downward. Absent an agreement between landlords – which would be illegal under the Sherman Antitrust Act – RealPage simply supplies information that makes for a more efficient market.
An efficient market, however, doesn’t mean a homogenous market. There are many other factors that go into pricing other than knowledge of the market price. For example, if you construct an apartment building today, your cost will be much higher than your competitor who built theirs 20 years ago. But controlled markets, not more efficient markets, are the goal of the progressive antitruster. Taken seriously, the Klobuchar-progressive antitrust model is based on the idea, to paraphrase George Orwell, that “ignorance is strength.” This will become an increasingly untenable, antediluvian position for progressive antitrust to make as AI infiltrates virtually every nook and cranny of the economy.
The appearance of “collusion” on rental prices is really one of supply imbalance caused by nimbyism and zoning restrictions passed by politicians who oppose urban density and also oppose urban sprawl (but who may, in fact, just oppose people). California, as usual, is a pioneer in this regard. The California Environmental Quality Act (CEQA) imposes 18 separate environmental impact reports that must be evaluated and approved by bureaucrats before a development can be undertaken. The Pacific Research Institute reports that these environmental reports can easily add more than $1 million to the cost of completing a housing development. Many states are not far behind California in taking a punitive stand against the supply of more housing.
What about rent control? Could that be the answer to high rents? A vast trove of studies demonstrate that rent control further degrades the creation of new housing stock needed to lower rents and degrades the condition of existing housing. A Swedish economist famously said that “in many cases rent control appears to be the most efficient technique to destroy a city – except for bombing.”
Now the Harris campaign wants to bring California-style, progressive economics to the national level. Vice President Kamala Harris proposes to make homes more affordable by providing upfront payments for homes for first-time buyers, up to $25,000. Ask any economist: When you give money to consumers to buy something, does that something become more affordable? Providing money for housing would surely make housing affordable in the same way that subsidized government-backed student loans have made a university education so affordable.
The answer to rental prices is, of course, to enact policies that encourage rather than discourage developers to build more apartments. Until state and local governments reform policies that result in more building, consumers can at least turn to – you guessed it – algorithms to find the best deal.
Robert H. Bork Jr. is the president of the Antitrust Education Project.
Originally published at BizPac Review.