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The U.S. Department of Justice has filed an antitrust case against RealPage, a digital platform that provides rental housing search services. Users of the platform claim that RealPage's pricing algorithm, used by many of the country's largest landlords, artificially inflates rental prices.
RealPage's software, called AI Revenue Management, sets prices for its clients — landlords and property managers — based on non-public information it collects from the market. The content writing service platform helped landlords overcharge 40,000 apartments by 7%, the plaintiffs' complaint alleges . They say
coordinated behavior between RealPage and landlords led to the formation of a cartel
RealPage said its algorithm recommends, rather than dictates, pricing.
In practice, there have not yet been cases where the algorithm was initially created for obvious price manipulation, except for outright fraudulent services, noted Alexey Drozd, head of the information security department at SearchInform, in a conversation with RSpectr. But often online businesses and people become hostages of algorithms.
Alexey Drozd, SearchInform:
- For example, there is an aggregator where stores display their products. Its algorithm promotes those who set a lower price on the platform. A market participant with a low price automatically gets to the top of the search results, while others are also forced to lower their prices in the aggregator to avoid a drop in sales.
As a result, prices in a real store may be higher than on the online platform. The expert calls this situation "the grin of algorithmism."
Initially, the RealPage software was aimed at profits going to the platform's clients - landlords. "Having taken a monopoly position on the market, the program began to demand that they adhere to the recommended price level and, in fact, took landlords hostage. I would not be surprised if it turns out that the RealPage algorithm was adjusted manually," the expert reasons.
Digital platforms have enforcement mechanisms for their clients
For example, how often to show users information about the organization, and in taxi services for drivers there are “activity points,” he recalled.
Alexey Drozd sees another reason in the monopoly position of individual online platforms. Initially, the algorithm is created for general convenience, becomes widespread – everyone starts using it. But then the service becomes dominant, and then its dark sides appear. Sadly,
the most effective use of software leads to the construction of a structure that clearly copies the cartel
Therefore, in the digital world, antitrust solutions and the promotion of competition are needed, emphasized Alexey Drozd.
WAS THERE A COLLUSION?
Lawyer and partner at Privacy Advocates Alexander Partin believes that there is no need to amend the current antitrust legislation in the spirit of “AI algorithms should not be configured to raise prices.” General antitrust rules are already in effect and are quite applicable in cases involving digital platforms, he is sure.
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