Editor’s Note: Major players in the real estate technology landscape, Zillow Group Inc. and RealPage Inc., are grappling with significant legal challenges that underscore the intricate balance between innovation and regulatory compliance. Zillow’s preliminary settlement in an antitrust lawsuit highlights the ongoing conflicts surrounding its ShowingTime tool, an important asset in its tech arsenal. Concurrently, RealPage’s YieldStar software faces intense scrutiny under federal antitrust investigations, raising critical questions about competitive practices and market influence.

These legal battles are not just isolated incidents; they are salient moments that may redefine operational standards and competitive strategies in the real estate sector.

Industry News – Antitrust Beat

Zillow and RealPage Face Legal Challenges Amid Antitrust Concerns

ComplexDiscovery Staff

Seattle-based real estate tech company Zillow Group Inc. (Nasdaq: ZG) has reached a preliminary settlement in an antitrust suit it filed in December. Zillow had accused two multiple listing services (MLS) and an MLS consortium of attempting to prevent real estate agents from using ShowingTime, a Zillow tool that allows agents to schedule and manage listings. The preliminary settlement, filed in the U.S. District Court for the District of Arizona, didn’t disclose terms but indicated that paperwork for the final settlement should be completed within about a month. This marks a significant moment in the ongoing legal battles in the real estate technology sector.

Zillow’s lawsuit targeted Arizona Regional MLS and Milwaukee-area Metro MLS, along with the consortium MLS Aligned, which is made up of seven regional MLSs. According to the lawsuit, Arizona Regional MLS removed ShowingTime from their member portals in December, with Metro MLS following suit in February. While these two were named as defendants, MLS Aligned comprises other regional MLSs, none of which were named in the suit.

MLS Aligned was formed in 2021 and acquired another showing-management platform called Aligned Showings, rebranding it under their consortium. Zillow alleged that MLS Aligned tried steering agents toward Aligned Showings by making it the default setting and disparaging ShowingTime. When these measures didn’t work, Arizona and Milwaukee MLSs allegedly decided to remove ShowingTime altogether. The defendants argue that the lawsuit was motivated by fear of competition rather than genuine antitrust concerns, stating, “Although robust competition is the very cornerstone of American capitalism, Plaintiffs perceive it as a mortal threat and seek to weaponize the antitrust laws to kill it.”

In addition to managing listings, ShowingTime helps agents schedule photo sessions of listings and access interactive floor plans. Zillow acquired ShowingTime for $500 million in 2021 to strengthen its suite of real estate tools. The company further bolstered its ShowingTime platform by acquiring Milwaukee-based VRX Media and Aryeo, investing significantly in aerial and virtual tour capabilities for real estate professionals.

Meanwhile, RealPage Inc., another major player in real estate technology, is under federal antitrust investigation for its YieldStar rental pricing software. The software, which has been the subject of lawsuits in ten states and Washington D.C., has been accused of illegal price fixing. RealPage allegedly recommended rent increases to landlords based on data gathered from multiple landlords, rather than responding to market supply and demand. The consolidated lawsuits claim that RealPage conspired with landlords to inflate rental prices, citing that the company set prices in 60% of apartments in the D.C. area and 70% of apartments in Phoenix.

In a 2020 blog post, RealPage mentioned collecting data from over 16 million rental units across the U.S. Critics argue that this data usage resulted in nearly universal acceptance of YieldStar’s recommended rent increases, effectively eliminating market competition. ProPublica’s 2022 investigation highlighted that RealPage’s algorithm frequently recommended double-digit rent hikes. “As a property manager, very few of us would be willing to actually raise rents double digits within a single month by doing it manually,” said Andrew Bowen, a RealPage executive, at a 2021 conference according to ProPublica.

Arizona Attorney General Kris Mayes and Washington, D.C., Attorney General Brian Schwalb have filed lawsuits against RealPage and numerous landlords, accusing them of participating in a “centralized, anticompetitive scheme.” The Arizona lawsuit claims that in Tucson, 50% of multifamily units are priced using RealPage software, with even higher percentages in Phoenix.

RealPage’s technology and its impact on rent regulation have also caught the attention of federal agents, with FBI raids reported at offices of major landlords. President Biden even referenced the issue in his 2024 State of the Union Address. Legal experts believe that the situation represents a form of indirect collusion, as landlords independently provide data to RealPage, which then uses its algorithm to set rents based on this proprietary information.

The cases against RealPage and Zillow underline a critical juncture in real estate technology, revealing deep-seated legal and competitive challenges. The outcomes of these lawsuits could reshape how technological tools are employed in real estate transactions and management across the nation.

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