Judge Halts New York Ban on Algorithmic Rent-Setting Software

US District Judge Valerie Caproni in Manhattan granted RealPage a preliminary injunction Tuesday, allowing the company’s rent-recommendation software to remain available while its challenge to the state law proceeds, according to Reuters.

RealPage, which is owned by private-equity firm Thoma Bravo, contends that the New York measure violates the First Amendment because it limits the use of pricing recommendations generated by its software. The statute was designed to prevent landlords and real estate professionals from using algorithmic pricing systems in ways that could contribute to higher rents, Reuters reported.

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Caproni described the constitutional question as close but concluded that RealPage had shown enough likelihood of succeeding on its challenge to justify temporarily stopping enforcement. According to Reuters, the judge said the statute potentially reaches ordinary commercial activity merely because software is involved and noted that businesses routinely consider competitors’ prices when setting their own.

The ruling puts on hold an effort by New York officials to address the growing role of automated pricing systems in the rental market. Gov. Kathy Hochul signed the antitrust measure in October. It was sponsored by Brad Hoylman-Sigal, then a state senator and now Manhattan borough president, who argued that it would help curb practices that artificially raise housing costs, Reuters reported. New York had already agreed not to enforce the measure while Caproni considered RealPage’s request for an injunction.

Related: Dutch Regulator Calls for Greater Transparency in Algorithmic Pricing

The office of New York Attorney General Letitia James defended the legislation in court, arguing that the state has authority to regulate allegedly anticompetitive conduct involving technology companies and that the statute targets business practices rather than constitutionally protected expression, according to Reuters. James’ office declined to comment on the ruling Wednesday. Hoylman-Sigal’s office did not immediately respond to Reuters, while a RealPage spokesperson also had no immediate comment.

The dispute adds another legal front for Richardson, Texas-based RealPage as regulators scrutinize the use of algorithms in rental pricing. Reuters reported that the company filed its New York lawsuit two days after reaching a settlement with the U.S. Department of Justice under which it agreed to restrict its software from using competitors’ nonpublic information to produce pricing recommendations.

The preliminary injunction does not resolve the underlying constitutional challenge. Instead, it prevents New York from enforcing the law while the litigation continues, leaving the broader question of how governments may regulate algorithm-driven pricing systems for another stage of the case.

Source: Reuters