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2024-06-10 07:00 by Karl Denninger
in Corruption , 313 references Ignore this thread
What's This: Anti-Trust?
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Oh look what we have here!

In a dramatic turn of events that could have far-reaching implications for renters nationwide, the Federal Bureau of Investigation (FBI) conducted an unannounced raid on Cortland Management’s headquarters in Atlanta on Wednesday, May 22. This action is part of a criminal antitrust investigation by the U.S. Department of Justice (DOJ) into allegations that Cortland has been involved in a conspiracy to artificially inflate apartment rents. This raid is more than just a legal drama; it’s a significant development that could impact millions of renters, including those in Rhode Island, who have been grappling with soaring rental prices.

The allegations in this article are damning; the goal is allegedly to prevent landlords from "undervaluing" their properties.

Its a felony to collude between providers to restrain trade or fix prices.  Even the mere attempts counts; you don't have to succeed.  This is not a "fine" style offense either; it is a criminal felony carrying hard prison time.  You could be excused if you didn't know this in recent years since virtually nobody in the corporate world is ever prosecuted for this conduct over the last several decades -- but that law has been on the books for over a hundred years, and was put into place during the time of Standard Oil and other monopolists.

There are some economists who have claimed that cartel-like behavior is basically impossible to police in that someone will always defect and take market share by doing so.  That's a convenient fantasy unsupported by the facts.  Find me, for example, a hospital or doctor's office that takes said approach and forces the others to match their pricing or go out of business for lack of customers.  I certainly did in the 1990s with MCSNet and spent a lot of my time and mental firepower trying to figure out how to undercut competitors and most of that focus was on how to do more with less internally; that is, to advance productivity.  But that's hard -- it requires a lot of effort and of course its pretty easy to be wrong when you go down a path you believe will lead to lower costs -- and it doesn't.

What's interesting here is that the conduct in question dates back to well before the pandemic, allegedly originating in 2015, and the allegation appears to be linked to a private equity firm that also bought up and combined a competitor to RealPage's management and pricing systems.

Algorithmic pricing systems are nothing new and are legal as long as they're constrained to a single supplier.  There's nothing wrong with a vendor deciding to use such a system as "yield management" (as is often done by airlines or a trucking company) but when extended over more than one competitor it raises serious legal questions.  Our government has flat-out refused to look at obvious areas where this sort of collusive behavior is in clear evidence (health care being the most-outrageous, but hardly the only place) but apparently the runaway cost of housing and political backlash from it has finally overcome glad-handing refusal to enforce long-standing law.

Now if we could just get the FBI to be equally-interested in similar collusive practices between hospitals and insurance companies, or the buying up of doctor and dental practices by both hospitals and private equity firms that also lead to price escalations that are even more egregious than in the rental market.

After all you can move somewhere else but its quite a bit more-difficult to decide to shop around for a hospital while having a heart attack, isn't it?

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