Price fixing by algorithm is still price fixing

I think there has to be some intentional and provable link that you and I agreed (colluded) to use a particular value and set a floor below which we wouldn't sell.

So naturally there's a market for a product that helps landlords make data-driven pricing decisions. I'm sure the big landlords know exactly what they're doing, but I suspect that the smaller landlords don't even realize they are participating in a price-fixing cartel.

As an interesting point of comparison, consider that the Zillow "zestimate" is also an algorithmic price recommendation, shared by all market participants. What's the difference there? Is it that buyers and sellers can both use the same algorithm freely?

I want to make very clear that I think price-fixing is bad and that I believe extremely high real estate prices are at the root of a large and growing amount of misery in Western economies and societies. But I'm also cautious of pursuing thoughtless regulation that hurts small businesses, to the advantage of the big businesses that are causing all the problems in the first place.

Any individual can go out there and build a model for the rent price, the issue comes in when that model is able to coordinate everyone to keep the prices high and discourage competition/undercutting.

Individually, without speaking, every landlord decides that it's in their best interest to charge the highest (per square foot) price that a nearby property is charging. They also all individually understand that if they leave units vacant instead of undercutting eachother, the market impact in favor of their interests will be sufficiently positive to justify the lost immediate revenue, and they trust (blindly) that no landlords will defect from this prisoner's dilemma. There's no communication at all; they all just understand game theory and have blind trust in their fellow landlords.

This would have the exact same material impact on renters. The only difference is that it's slightly harder to pull off. Is it illegal, and should it be illegal?

can you recommend a link that this describes this in detail?

Small nitpick, collusion in a general sense is not illegal, but a price-fixing contract/conspiracy would be a crime under the Sherman Antitrust Act.

It doesn't matter how the algorithm operates. If all landlords in an area publically agree that they will set rent prices at 400xx the price of a coke can, they are only using public information, but still engaged in price fixing.

It doesn't matter how many people actually use the algorithm. If you try to start a cartel to do price fixing and only succeed in convincing two of your 50 competitors to participate, you've still engaged in illegal price fixing.

It doesn't matter if individual price negotiation happens or not. If a bunch of companies agree to set the same list price, but also agree that they can offer deals to their customers, they are still engaging in illegal price fixing.

It doesn't matter if the scheme actually succeeds in changing the prices. If two companies meet and agree to set prices at a certain value, but then they backstabber each other and undercut the agreed price, or simply other companies in the space who were not part of the scheme have too much market power to allow prices to change, the original companies still agreed to an illegal price fixing scheme and are guilty.

All of the above will probably have a massive impact on the amount of damages and so on. But they have no bearing on the verdict, as the FTC lays out at length in the filing they link from the article. And this is not speculation, it is established case law.

that is the only relevant part that makes it price fixing.

Then you probably shouldn't be participating in this discussion.

I added /s because dear lord this thread is full of people who think its true. Housing shouldnt be an investment venue when we have millions unhoused.

If you just charge what you need to cover costs you may find yourself with a vacant apartment.

But, if the price you calculate this way is too large, no one will rent your house.

And, if the price you set this way is too low, you're leaving money on the table, which you may or may not be fine with. If the difference is high enough, someone might even pay you the rent you asked for, but then rent it out themselves to someone else for the higher price, and pocket the difference, which you may feel cheated by.

RealPage says if you have a portfolio of apartments, that following their recommendations will generate you more overall, regardless of occupancy. Their algorithm literally is "it is better to rent out 19 units at $X, when the demand will drop to 0.94X if there's 20 available". And it can do so because it happens to know that the other 80 units on the market with other landlords will be following the same rule.

Colluding to fix prices, by any means, is illegal. It is still illegal even if the scheme is only followed by a handful of those who "agreed" to it. It is still illegal if it utterly fails to control the price and thus has no material impact.

It's like trying to scam people. You're not allowed to try to defraud people. It doesn't matter if your scam is so bad that it would cost you more money to execute than you would get out of it, and it doesn't matter if no one engages with your scam at all: what you were doing is still illegal.

This is impossible. If all the units are rented then by definition the market clearing price is being charged. The collusion comes when landlords start leaving units vacant.

What is the value of subscribing to a pricing service where you have no idea how your competitors are using the numbers (over-, match-, under-price)?

Versus what is the value of same, if you know your competitors never under-price?

That value difference is the value of running a cartel.

The only thing that's legal is doing your own pricing research, using your own methods. You can hire a consultant to do this for you, but this burden then transfers to them: they can't consult for multiple competing businesses.

While you're right about how regulators typically approach this, it's also important to note that the converse is also true. That is, if they happen to get clear proof that Alice and Bob agreed together to raise rents, then it doesn't matter if they actually succeeded in increasing rents in the area, and it doesn't even matter if they didn't follow through with the agreement: the agreement itself was illegal, and they would get an easy win in court (though damages may be low if the material impact was low, so the case may still not be worth pursuing).

It is typically very rare for such direct evidence of collusion to exist, and thus indirect evidence like you suggest is normally how this is investigated.

However, RealPage and the others here have provided this evidence directly: the way their price recommendation service is structured, the terms and conditions and so on, constitute direct evidence of an explicit attempt at price fixing. So, even if it turned out that all of landlords participating in this scheme actually "cheated" the price recommendation algorithm, and even if it turned out that rents went down or stayed the same when RealPage moved in, they would still be guilty of price fixing, per the FTC.

Most products centered on whether you actually got a lease or not in the first place (and it was mainly crime related). Once you got into a lease and were struggling to pay rent, anything else would have moved to a manual action taken by the landlord if they wanted to be a soulless jerk. (Not sure about whether Realpage has some kind of automated product for that but we didn’t)

As for competing YieldStar product. Our main objection was that if we were to build price projection software, it’d better reflect the actual market. The algorithm and heuristics like “raise rent on Christmas” didn’t sit well, so we raised the conversation and stalled the project for a few weeks. Eventually we were told we’d get to revisit our concerns in the V2 but we’d be overruled for the time being “just to get out this MVP”.

this price fixing is partially about units not even for rent which is a different problem you don't want. (but you want some units not for rent while they remodel)

Real Estate will stop being a free money machine when the government stops artificially restricting housing supply with single-use, single-family zoning.

Are you aware that the government is the entity preventing housing from being built in many cities?

I don't think zoning should be abolished or anything but clearly the regulations the US has now, at least, are incorrect and restrict supply far too much.

On the contrary, the skyrocketing homelessness rates around the country are showing that demand for housing is more elastic than people thought.

I lived in floor 30 of a “luxury” skyscraper in Seattle built after ~2015. We had an algorithm for pricing according to the landlord and the class action letter we received. Amazing water views and city views. Clearly desirable housing in a city flush with rich people and a massive housing shortage. I was the only occupant on the floor and the only tenant at the time ever to live in that unit. They tried to raise my rent like $1000/m when lease was up. We paid it since we had just gotten a raise. Next lease renewal was about $1000 again and we moved out because $2k extra was just too far above comparable units nearby. They literally offered us a Starbucks gift card to stay. We could see the other vacant units listed on the buildings website and they were always priced way above comparable units in neighboring buildings.

Oh and to directly answer your question, I’m guessing the building was never more than half full. The mail room was never full, and the parking garage had about 20/100 spots in use.

Unless you're talking about a tax on vacant properties.

That means leadership can change the course of an organization by ruthlessly making them do other things until people internalize those things as the right thing, or leave.

That only explains decay though, not the magical idea that under the right party things spring back. The best to hope for is a democratic president to slow down the decay. But it is simply so much easier to tear things down than to build things up, that it will take a lot of democrats to see actual improvement.

However, they've learned. At the end of his term, Trump created a new classification of employment, Schedule F. Schedule F employees did not have civil-service protections and could be fired on a whim. Fortunately, he lost the election before he could use it. Biden removed it.

Now, Trump-aligned groups like the Heritage Foundation are running programs to recruit Trump loyalists whose main and almost sole qualifications is loyalty to Trump (see Project 2025). They don't want a repition of last time where federal employees had the gall to actually follow the law instead of the dictator.

Obviously law firms colluding on prices isn't good but how they are colluding is completely different.

This was, e.g., the case in the major ebook price fixing case where Apple was the common intermediary between the publishers.

To keep things simple, let's say a city has two landlords, Alice and Bob, who each own around half of the residential rental properties in the city.

Textbook definition of price fixing is if Bob and Alice agree to never rent for less than $5 per square foot.

Next scenario: Instead of a minimum price, let's say that Bob and Alice agree a formula on how to price their properties based on vacancies. The formula can be as simple or as complicated as you like. But in this scenario, if the formula never gives them a result less than $5/square foot, it has the exact same outcome as the textbook scenario. And since there is direct coordination between Bob and Alice, this is definitely price fixing. In fact, it's even worse than the textbook scenario, because now they're coordinating on exact prices, and not just a minimum.

Forgetting formulas for a minute, let's say Charlie, who is unrelated to Alice and Bob, approached them separately and offered to sell them information on how to set their prices. In this case, there's no algorithm involved. They each pay Charlie a small fee per month, and he tells them not to rent for less than $5 per square foot. There's no direct communication between Bob and Alice, but because they both know that the other is acting on the same advice from Charlie, the result is the same as the textbook scenario. You could even argue that there is indirect communication between them, and that Charlie is running some kind of price laundering service.

Finally, you can combine the two. Bob and Alice both tell Charlie how many vacancies, delinquent payments, etc. they have. Charlie feeds all the data into his computer, which contains a really complicated formula, and that computer tells them how much to charge. And wouldn't you know it, that formula never produces a result less than $5/square foot. Again, because Bob and Alice know that the other is using this service, and because they have an exact price, rather than a minimum, they know they don't have to negotiate with potential customers. The other landlord won't give that customer a better deal.

State competition laws may have separate rules for price fixing and other specific kinds of behavior or have similarly broad language to the Sherman Act.

https://www.propublica.org/article/yieldstar-rent-increase-r...

>A genial, self-described “numbers nerd,” Jeffrey Roper was Alaska Airlines’ director of revenue management when it and other major airlines began developing price-setting software in the 1980s.

>Competing airlines began using common software to share planned routes and prices with each other before they became public. The technology helped head off price wars that would have lowered ticket prices, the Department of Justice said.

>The department said the arrangement may have artificially inflated airfares, estimating the cost to consumers at more than a billion dollars between 1988 and 1992. The government eventually reached settlements or consent decrees for price fixing with eight airlines, including Alaska Airlines, all of which agreed to change how they used the technology.

  But based on the post, this really seems to not be the case?

  an agreement to use shared pricing recommendations, lists, calculations, or algorithms can still be unlawful even where co-conspirators retain some pricing discretion or cheat on the agreement.

  The agencies filed a joint legal brief explaining...

  ... when competitors *agree to fix* end prices, ... *the agreement* is the violation, and unsuccessful price-fixing schemes are as unlawful as successful ones.

  In Plymouth Dealers’ Association, 279 F.2d 128, for instance, a defendant convicted of price fixing for agreeing with competing dealers on a “fixed uniform list price” for Plymouth cars argued that the conviction could not be upheld because the government’s case required “proof of something more—that [the uniform list price] was adhered to; that it was utilized to fix prices; or that it did actually fix prices.” Id. at 130. The Ninth Circuit rejected this argument, stating that “the fact that the dealers used the fixed uniform list price in most instances only as a starting point[] is of no consequence.”

If people are spending more real money to get the same housing, something has gone wrong.

Filings are done through the SERFF system.

So Google SERFF and say "NY". (which will take you to https://filingaccess.serff.com/sfa/home/NY )

Then search by carrier, line of business etc. You want "rate" filings. You will find a report by an actuary, lots of justification explaining price changes, correspondence between the company and regulators asking/answering questions, details on how the rate changes will affect current customers, etc.

SInce most rate filings are to adjust current in force rates, they don't always repeat all the underlying details. With a little more effort you can look up initial rate filings, and they will walk through methodologies in more detail.

Once those prices are filed, they are locked in (for consumer types of insurance). Companies can't deviate in any way. (including giving unauthorized discounts).

This is what I dislike about insurance. If someone hits my (hypothetical) $100k car and ruins it, I win $100k, but if someone hits my $1k car, I only win $1k.

Yet the person that hit me did precisely the same action/error.

If more expensive cars leads to more expensive claims on average, the price of insurance might reasonably go up even if the worst-case exposure is the same…

Still worth it, likely, because saving lives doesn’t really have a dollar amount (cue fight club) - but certainly there.

Old steel bumpered cars would have zero costs at 0-5 mph collision; plastic breaks even at nearly zero. But the newer car safety is much higher.

This is the current system.

I don't understand how you come to this conclusion. Can you explain?

Required insurance covers € 7.5 million for personal injury, € 2.5 million for property damages.

Edit: P.S. I am in favor of single-payer healthcare, I just don't think that is the particular cause of expensive liability car insurance - rather personal injury and property damages would seem a larger driver to me.

All the median-priced-cars from these brands, which are instantly totaled by anything other than cosmetic damage, are still driving up everybody else's rates.

My parents have seen a 4x increase in the value of their house in 20 years, is that unfair?

But instead, if you can notice rent increase let's say 1 month before year is full, they might look at what are current cost and think oh, I could do with lower increase.

Also something like 2% above inflation does not lead to unreasonable increases. Until market rates are reached.

The properties people purchase as second and third homes aren't going to make a difference to the people struggling to afford 1 bedroom apartments.

Focusing on second and third homes is just a way to punish people wealthy enough to afford multiple homes. While punitive taxes against other classes are attractive to certain parts of the voter base, it doesn't actually improve the situation for people looking for cheap apartments at all.

So yeah, if you were lucky enough to have a grandparent get one of those apartments, yes, it will be affordable.

> Increasing supply seems unlikely to fix the underlying issue.

The underlying issue is that the law of supply and demand applies to housing just as to any other market. Increasing the supply is the only way to lower prices.

As opposed to your dishonest opinion?

These algorithmic pricing systems extend that information advantage by pooling information across landlords (maybe not illegal by itself) and leveraging their position as market-wide price-setter to push rents higher, with the promise that so many units are following their recommendations that renters have ~no alternative (very illegal price fixing)

I worked in legal higher-ed for a long time; I have absolutely no legal education, but my job involved reading lots of writing about the law, both for expert and non-expert audiences. Accurately conveying the importance of a topic without getting into the nitty gritty or running into collisions with colloquial and legal word usage is tough. Even that one paragraph I quoted had like 6 citations or something, and that's not just to satisfy technical requirements. There's just so much subtlety behind even very common words like may, must, shall, and will when used in a legal context that it seems like context switching is tough. The word count seems to grow logarithmically with the factual and conceptual detail, and even then you're leaving out a lot of padding beneficial to laypeople. We ran an open database of caselaw and we regularly got questions from well-meaning folks trying to inform themselves about some legal predicament by reading the cases, but it's just not feasible. Lots of folks argue that the whole thing is just based on shitty writing practices and gatekeeping legal knowledge, which might be true, but the difference is still consequential now. I actually think this is one area generative AI will be a huge boon, though I was skeptical until pretty recently.

Also, accessibility is a concern. Lawyers doing this sort of work are often very concerned with making their work useful to general audiences. Since subpar access to educational resources and cognitive disabilities are over-represented among low-income people, they're the most heavily affected by this. I wouldn't be surprised if they avoided a lot of nuance assuming curious people would just read the brief. I imagine they'd have written it differently specifically for a largely college-educated professional crowd, but I can definitely see why they didn't.

Vacancies kill returns.

Which is an objectively bad price for housing.

If competing businesses agreed to use the tool and not deviate (or not deviate more than a set amount) from its suggested price, then yes, that's totally price fixing.

I believe that it's price fixing even if they merely agree to use it to inform their starting offering price.

In some other comment thread, folks mentioned that if a landlord outsources rent price investigation to a third party, that third party has to be __very__ careful about working with other landlords, so as to not even accidentally engage in price fixing by recommending prices to multiple competing landlords.