Blumenthal Sponsors Legislation to Crack Down on Price Fixing Algorithms that Help Predatory Landlords Raise Rents

[HARTFORD, CT] – U.S. Senator Richard Blumenthal (D-CT) joined Senate colleagues in introducing two new bills that would ban predatory practices by landlords who use pricing algorithms to avoid competition and raise rents.

Senator Blumenthal is a cosponsor of both the Preventing Algorithmic Collusion Act, which would prevent companies from using algorithms to collude to set higher prices, and the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act, which would crack down on companies that help landlords increase rents in already high-priced markets.

“This practice affects housing throughout Connecticut. This kind of conscious collusion ought to be stopped. It is inflating rents for the ordinary person who goes to the landlord and is given a price that is based on an algorithm rather than real competition. Stifling competition ultimately means higher prices for renting apartments and homes here in Connecticut and all around the country,” said Blumenthal on Tuesday at a press conference at Greater Hartford Legal Aid.

The Preventing Algorithmic Collusion Act would prevent companies from using algorithms to collude to set higher prices. Price fixing and other forms of collusion are illegal under current antitrust laws. However, current antitrust laws may be insufficient when competing companies delegate their pricing decisions to an algorithm. This has already occurred in rental housing, and we must ensure that it does not spread to other sectors of our economy with the proliferation of algorithmic pricing.  To strengthen current price fixing law, this legislation would:

• Clarify the law to make it easier to challenge algorithmic price-fixing and help antitrust enforcers stop algorithmic price-fixing before it occurs;
• Increase transparency by requiring companies that use algorithms to set prices to disclose that fact and give antitrust enforcers the ability to audit the pricing algorithm when there are concerns it may be harming consumers;
• Ban companies from using competitively sensitive information from their direct competitors to inform or train a pricing algorithm;
• Direct the Federal Trade Commission (FTC) to study pricing algorithms’ impact on competition. 

The Preventing Algorithmic Collusion Act is led by Senator Amy Klobuchar (D-MN) and cosponsored by Senators Blumenthal, Ron Wyden (D-OR), Dick Durbin (D-IL), Peter Welch (D-VT), and Mazie Hirono (D-HI). The bill is endorsed by the Open Markets Institute and American Economic Liberties Project.

The Preventing the Algorithmic Facilitation of Rental Housing Cartels Act would crack down on companies that help landlords increase rents in already high-priced markets. These services allow landlords to collude to set prices via software and price-setting algorithms. The bill is led by Senators Wyden and Welch, and cosponsored by Senators Blumenthal, Klobuchar, and Hirono, as well as Senators Bernie Sanders (I-VT), Laphonza Butler (D-CA), Jeff Merkley, (D-OR), and Martin Heinrich (D-NM).

According to reporting by ProPublica and other news outlets, companies like RealPage and Yardi advertise their products as “property management software,” but in fact they help landlords in Connecticut and across the nation to coordinate prices to increase rental rates in the same market. The companies collect real-time price and lease information and in return suggest rent increases. The result is less competition and higher rent prices for consumers. RealPage, for example, says that it increases rents for client landlords between 5% and 12%.  This legislation would:

• Make it unlawful for rental property owners to contract for the services of a company that coordinates rental housing prices and supply information, and designate such arrangements a per se violation of the Sherman Act;
• Prohibit the practice of coordinating price, supply, and other rental housing information among two or more rental property owners;
• Make it unlawful for two or more coordinators to merge where a merger creates an appreciable risk of materially lessening competition; and
• Allow individual plaintiffs to invalidate any pre-dispute arbitration agreement or pre-dispute joint action waiver that would prevent their bringing a suit under this act.

The Preventing the Algorithmic Facilitation of Rental Housing Cartels Act is endorsed by the American Economic Liberties Project, the National Low Income Housing Coalition, and the National Alliance to End Homelessness.

Video of Blumenthal’s remarks in Hartford can be found here.

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