In an update to our prior report on the evolving antitrust landscape for algorithmic pricing, a federal judge in Washington recently denied a motion to dismiss claims that a group of multifamily rental property managers violated federal antitrust law by sharing commercially sensitive information with a property management software company and implementing the software’s pricing recommendations. Notably, the judge also held that the per se standard applies to those claims rather than the more complex rule of reason. The decision in Duffy v. Yardi Systems breaks with several other algorithmic pricing rulings that have either dismissed the plaintiffs’ conspiracy claims or held that their allegations are not per se illegal. And it underscores the importance of consulting experienced antitrust counsel when considering information sharing or use of algorithmic systems in connection with pricing.
Court rejects distinction between “traditional” horizontal price-fixing agreements and agreements facilitated by technology
Defendants in Duffy include a group of ten owners and operators of multifamily residential units, along with Yardi Systems, Inc., the developer of the property revenue management software that the lessor defendants employ. Plaintiffs—a proposed class of people who leased multifamily residential real estate units—allege that defendants “joined a conspiracy to share detailed, competitively sensitive, non-public information which would be used to establish supracompetitive rental rates in the multifamily housing market in violation of Section 1 of the Sherman Act,”1 and that the agreement is per se2 illegal under the Sherman Act.
On December 4, 2024, Judge Robert Lasnik denied defendants’ motion to dismiss the complaint, finding that plaintiffs adequately alleged, among other things, “both invitation and acceptance and sufficient plus factors to give rise to a plausible inference of a preceding agreement.”3 Furthermore, Judge Lasnik found that “the key to plaintiffs’ antitrust claims is the horizontal agreements between and among the lessor defendants to entrust Yardi with their sensitive commercial information in order to obtain and implement the supracompetitive rental rates generated by Yardi’s algorithm.”4 The court rejected defendants’ argument that, because plaintiffs’ claims are “premised on the use of a revenue management product,” they are “non-traditional” and do “do not fall within the limited category of claims meriting per se treatment.”5 Citing Supreme Court precedent stating that “the machinery employed by a combination for price-fixing is immaterial,” Judge Lasnik found that, since plaintiffs adequately alleged a horizontal price-fixing agreement, and because the “Sherman Act declares all such horizontal agreements to tamper with price structures unlawful”,6 the court need not determine whether plaintiffs have also alleged anticompetitive effects under the rule of reason.
Notably, Judge Lasnik expressly disagreed with a prior ruling from the Middle District of Tennessee in a similar case7 against RealPage and a group of landlords that allegedly used RealPage’s algorithmic pricing tools to raise rents. Unlike Judge Lasnik, the court in RealPage declined to apply the per se standard because plaintiffs failed to allege that RealPage or any of the lessors “can enforce acceptance of price recommendations,” and because “courts are hesitant to apply the per se standard to new or novel ways of doing business that have not yet been tested or studied by economists to conclusively determine that these types of conspiracies are per se anticompetitive.”8
The Duffy decision also comes on the heels of two recent decisions in the District of Nevada and District of New Jersey, which granted motions to dismiss similar algorithmic pricing cases targeting the hotel industry for failing to allege facts sufficient to infer agreements between competitors.9 Both cases are currently on appeal.
Looking ahead
As we have previously discussed, algorithmic pricing and information-sharing have been frequent targets for antitrust enforcers and private plaintiffs, and the DOJ Antitrust Division has publicly argued that using algorithmic software can be per se illegal. It remains to be seen whether the next administration, under the leadership of a new Assistant Attorney General,10 takes the same approach and whether Judge Lasnik’s decision in Duffy fuels future claims alleging similar conduct.
1 Order Denying Defendants’ Joint Motion to Dismiss, Duffy v. Yardi Systems, Inc., No. 23-cv-1391 (W. D. Wa. Dec. 4, 2024), ECF 187 (citing Complaint, Duffy v. Yardi Systems, Inc., No. 23-cv-1391 (W. D. Wa. Sept. 8, 2023), ECF 1).
2 Per se violations are those that are deemed “so harmful to competition and so rarely prove justified that the antitrust laws do not require proof that an agreement of that kind is, in fact, anticompetitive in the particular circumstances.” NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 133 (1998). By contrast, agreements evaluated under the “rule of reason” standard require “court to conduct a fact-specific assessment of ‘market power and market structure . . . to assess the restraint’s actual effect’ on competition.” Ohio v. Am. Express Co., 585 U.S. 529, 541 (2018) (quoting Copperweld Corp. v. Indep. Tube. Corp., 467, U.S. 752, 768 (1984)).
3 Order Denying Defendants’ Joint Motion to Dismiss, Duffy v. Yardi Systems, Inc., at 11.
4 Id. at 12.
5 Order Denying Defendants’ Joint Motion to Dismiss, Duffy v. Yardi Systems, Inc., at 13 (citing Defendants’ Omnibus Reply in Further Support of Motion to Dismiss the First Amended Class Action Complaint, Duffy v. Yardi Systems, Inc., (March 15, 2024), ECF 155 at 3).
6 Id. at 15-16 (citing Socony-Vacuum Oil Co., 310 U.S. 150, 223 (1940)).
7 In re RealPage, Inc., Rental Software Antitrust Litig. (No. II), No. 23-MD-3071 (M.D. Tenn.)
8 Id. at 14 (citing In re RealPage, Inc., Rental Software Antitrust Litig. (No. II), No. 3:23-MD-03071, 2023 WL 9004806 at *22 (M.D. Tenn. Dec. 28, 2023)). Judge Lasnik argued that the judge in RealPage approached the question of per se treatment incorrectly and “cite[d] no authority for judging the reasonableness of an adequately alleged conspiracy to restrain trade by the strength of the conspiracy allegations.” Id.
9 See Gibson v. Cendyn Group, LLC, 2024 WL 2060260 (D. Nev. May 8, 2024), and Cornish-Adebiyi v. Caesars Entertainment, Inc., 2024 WL 435618 (D.N.J. Sept. 30, 2024).
10 On December 4, 2024, President-elect Trump announced that he plans to nominate Abigail (Gail) Slater to lead the Department of Justice (DOJ) Antitrust Division.
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