Comment by FesterCluck | Hacker News Reader

Comment by FesterCluck | Hacker News Reader

Here's how this works:

Illegal collusion and price fixing happens when owners of competing companies communicate to set prices.

Apartments prices were historically a highly volatile compared to their lease lengths. One would have to own a majority of the apartments in a market to gain the data necessary to know things like upcoming tenant renewals, apartment renter influx/outflow, etc to combat things like mass-tenant exodus to a nearby apartment complex offering $100 less rent per month. This industry has been historically very competitive.

Realpage does the colluding for them inside a database and whispers back "here's our number".

How are non-participating properties punished? Debt Servicing. Try getting business loans for these properties without running Realpage's tools.

Look at the investors and board members of RealPage, InvesTran, etc. and those in the property management companies. They are a very small circle hiding normally illegal activity behind algorithms.

Encrypting or obfuscating illegal communications doesn't suddenly make them legal. Neither does charging money for the privilege.

I got to talk to one of the wealthiest apartment owners in my state a few years back. He gave me a lot of details of his financial formula, which was really interesting.

But one thing is found critical is that he always made sure his apartments were priced at the low end. He’d rather make sure they were all full all the time instead of dealing with volatility.

The man is hugely successful and they just named one of the colleges after him at my University.

It is very basic maths as well (that evades most small time landlords).

100% occupancy at 90% of the market price with high quality tenants makes you more money than 80% occupancy + agent advertising / finding fees at full market price with bad tenants.

RealPage's formula is largely the opposite of that.

Before RealPage, most large landlords would aim for 97-98% occupancy and set their rents accordingly.

RealPage would encourage landlords to instead aim for 90-95% occupancy by setting higher rents. Most of the time, this turned out to be a more profitable strategy, even though it makes property managers nervous because they feel like empty apartments = lost money.

While this makes sense, I also see how RealPage likely got caught up and thought this was business insights they were selling as a data aggregator. (Being devil's advocate, I don't know much about their knowledge or ignorance.) Something that is all to common of a business practice these days. If the "here's our number" was whispered back as a "score" instead of a price and the cost was denominated in interest rates instead of dollars, wouldn't it be similar to the credit scores we all have? Is that a form of collusion as you define it?

This is a very reasonable question which should not be downvoted. There was a huge scandal about interest rate collusion: https://en.wikipedia.org/wiki/Libor_scandal

I think it's under-studied how information and markets interact. There was the great "markets are efficient if and only if P=NP" paper. Basically the insight was that prices are information and a market is (supposed to be) a computing mechanism for finding "optimal" transactions. Price discovery is often difficult. It is natural for participants to outsource it to computers. But if all those computer services are run by the same company .. suddenly you have a single agent setting prices, not a market.

> wouldn't it be similar to the credit scores we all have

Wow, have never thought about this. Yes, yes they are similar... That's why I get basically the same interest rates across all financial institutions. There's no competition, basically they're communicating to "price fix" a rate.

Though I doubt America would raid the holy grail of capitalism, financial institutions

That’s not why.

Credit scores don’t discourage competition. Competition can still exist within brackets.

The reason rates don’t differ much is because most of the rate is determined by factors outside of the lenders control. There’s a pretty small margin for them to compete on price with each other with. That’s why rates on stuff like mortgages are basically commoditized.

Yes, and it skills be treated as such. I won’t hold my breath though.

Is it strange to be glad that, in that scenario, that those were the consequences for being a data aggregator? I have a deep cynicism about the work of data brokers and the large flows of data that, in the wrong hands, end up being used for surveillance.

Well, RealPage had a "policing agent" that made sure that RealPage customers were using the RealPage rate, and if not they were kicked out of the cartel.

Businesses doesn't get kicked out by Experian if they grant a loan to someone with a low Experian credit score.

https://youtu.be/cwlwrZst7d0?t=202

> I also see how RealPage likely got caught up and thought this was business insights they were selling as a data aggregator

Almost everyone I've met who has ended up in trouble with the law in business got where they are by this exact pattern. When they get caught, it's usually just naked, obvious crime. I've seen:

* Trading fake invoices between subsidiaries to increase top-line revenue leading to fraud charges.

* Fake billing between companies to paper over private use of a business jet.

* Medical billing software where diagnostic codes were optimized by matching the procedure to the highest paying service scenario. i.e. making applying a bandage be a emergency surgery bandage application which would be billed at 9x the price of a normal office visit.

* Lots of startups that started with a forward looking "were' going to build invention x" only to discover two years in that invention x is not possible. Instead of pivoting, the founders double down on invention x to raise more money with a "we're close" or "we are commercializing as we speak" pitch.

* Taking loans against customer owned securities. Behold infinite non-diluting cash, and infinite jail time when caught.

In every case, the pattern was completely ok from the founder's point of view, but when you look at the practice in total it was pretty easy to see crime.

Insurance companies have been doing this for years. Feed data into an algorithm controlled by third parties (and what’s more, share data about people who’ve been terminated, coordinate benefits, etc).

This isn’t talked about enough.

Reply on news.ycombinator.com