All right. Well, welcome, welcome to the Attorney General's office. Everybody. It's good to see you all again. Um It's a thought familiar to anyone who has tried to rent an apartment in this state in the last several years. Why is the rent here so damn high? While there are many reasons that the cost to rent an apartment has increased exponentially year over year. We now know that the question um that that question has been answered in at least in large part because we know that nine major residential landlords and a company called realpage allegedly conspired to fix rental prices for hundreds of thousands of renters in the Phoenix and Tucson Metro areas. So today I have sued them to end this conspiracy protect Arizona renters and recover civil penalties and restitution on behalf of Arizonans residential rents in Phoenix and Tucson have risen exponentially and astronomically in Phoenix, 36% of households rent apartments, 36% s and they have experienced 76% rent increases since 2016 76% in Tucson, 37% of households are renters and 30%. They have seen a 30% rent increase in uh since 2022 this happened in large part, we believe because of this conspiracy that stifled fair competition and essentially established a rental monopoly and our stu our state's two largest metro areas and real page and its coconspirator or co-conspirators concealed this illegal price fixing scheme from potential renters. The defendants con cons concealed their conspiracy from the public and deceived potential renters into thinking that they were being charged competitive rents realpage provided trainings to their co conspirators and instructed them not to mention real page or pricing algorithms when explaining rent increases to tenants. Instead, the leasing companies were taught by real page to lie and to say that units were priced individually and that concessions were built into the price in reality. However, prices were set by Real Page in Phoenix and in Tucson simply put the defendants illegally colluded with Real Page to artificially raise rents in these markets and they lied to potential renters. This conspiracy violated Arizona law and it harmed Arizonans and these co-conspirators include some of the biggest names in residential leasing, not only in Arizona but across the country and you see them up here including Trammel Crow, Greystar, uh Avenue Five and others. And these pictures on this screen are pictures of actual buildings at owned by landlords that were a part of the conspiracy in the state of Arizona. These buildings and the people living in these buildings were harmed by this conspiracy to raise uh rents. All of the people living in these buildings in Arizona were harmed by a conspiracy of landlords and real page to increase prices. So how did the alleged conspiracy work using what they called revenue management software realpage compiled competitively sensitive data on unit pricing and occupancy provided by the nine defendant competitors. And I say competitors with quotation marks because they were not competing at all. They were colluding with one another using this sensitive data realpage, then directed the competitors who entered this conspiracy on which units to rent when to rent them. And at what price? This was not a fair market at work. It was a fixed market that harmed renters while driving up the profit margins for this housing cartel. The conspiracy violates both the Arizona Uniform Antitrust Act and the Arizona Consumer Fraud Act 22 statutes that have not been used nearly enough in this state in recent years. Until now, the consumer fraud statute makes it unlawful for companies to engage in deceptive or unfair acts or practices to conceal or suppress material facts in connection with the sale. In this case, apartment leases. And what could be more unfair? What could be more deceptive than landlords who were using software and an algorithm to jack up the price of rents without telling renters that they were doing it. What could be more unfair and deceptive than landlords that were pumping information that should have been uh proprietary into a single entity into a single set of software and then allowing that software to come up with the highest price possible that is unfair under the law. And the antitrust statute in Arizona prohibits conspiracies from establishing monopolies to control or fix prices, which is what these defendants allegedly did. And this scheme affected a majority of renters in our state's two largest cities. A whopping 70% 70% of rental properties in Phoenix use real page 70%. Sure sounds like a monopoly to me. And what you see here on the screen is a graphic depiction of this conspiracy to defraud uh renters in uh Phoenix in the Phoenix metro area. You cannot throw a rock in Phoenix without hitting a building that was jacking up rents on their customers. It is shocking to see the number of buildings that were a part of this conspiracy. Uh In Tucson, we see something similar. Tucson, 50% of the Tucson multifamily apartment units are operated by companies that contracted with real page 50%. Again, you can see how much of the, how many of the renters in Tucson were impacted by this conspiracy to drive up rents. Um This scheme again affected uh a majority of um of the uh renters in both of those cities and how much higher were rents pushed uh in these properties. Our regression analysis shows that rental prices from the properties controlled by the conspiracy are at least 12% higher than the non-participant properties in the Phoenix area and at least 13% higher in the Tucson area. So you can see this very clearly. And I I wanna be clear, this is a conservative assessment of just how bad uh this is in the state of Arizona and how bad the the conspiracy and the scheme is. This analysis shows um what the average rent by real page users were and by non uh conspirator landlords. So the orange is landlords that were not using real Page to come up with an algorithmically uh driven price for the rental units. The blue are real page landlord users who were coming up with rents that were much higher because they had information about what all of their competitors were doing and they had agreed with one another and with real Page to use the real Page provided rent which in almost all of these cases was higher than the landlords who were not using real page. The bottom line is that Arizona residents have been harmed by this scheme through willfully deceptive practices and omitting material facts. These defendants tricked tenants, they tricked tenants into paying more for rent than they otherwise would have. And they did this at a time when inflation had skyrocketed and Arizona's affordable housing crisis was among the worst in the nation. It is nothing short of shameful and we are going to put an end to it. That's why I'm taking these entities to court, we're asking that these actions be deemed violations of our antitrust and consumer fraud statutes and that the defendants be enjoined from continuing their anti competitive behavior and that the court appoint a monitor to ensure all remedies ordered by the court are implemented fully. We're also asking for appropriate civil penalties, restitution and any other equitable relief for Arizona consumers deemed appropriate by uh the court under the antitrust and consumer fraud statutes. Arizona renters, Arizona families deserve better. And I'd be happy to take any questions that you have. I want to also recognize that we have the head of our antitrust unit here, Robert Bernheim and the head of our consumer fraud section. Laura Dilweg over here. Who can help uh answer questions as well. Yes, Stacey Attorney General to the point you just made, you can say if you can plain language, if your watching is successful, what changes for r great question. So, so, um what I'm hoping is that we will succeed in um in several respects in several ways that will help renters. Number one, I would like to see uh uh damages, restitution uh paid to, to renters. I want them paid back for the rent that um they paid that they shouldn't have it have that they should not have had to pay if this scheme had not been in place. So if we could go back to the slide um that this, so again, this is conservative, there's a delta here between what people were paying in buildings that were not controlled by Real Page and the buildings that were controlled by Real Page. The other thing I'd like to see is, um, a court order, these landlords uh, to stop using, uh, the Real Page and other kinds of software um, uh, that, that allow them to conspire to, to raise rents and then, um, civil penalties obviously to the state of Arizona. Um and any other equitable relief that a court would deem uh appropriate. How long do you believe that this was going on? Well, we, we allege that at least since 2016. So the evidence shows that real page in Arizona had become, um, a dominant market player, at least in 2016. Um, they had acquired, I believe something on the order of 44 different uh, uh software packages and companies that allowed them to roll it all up. Uh They have three, I believe three major software packages that landlords can use. Um, that is in the complaint, but in 2016, they really became, uh a dominant player in, in both the Phoenix and the Tucson markets. It could go back longer than that though, was brought up to your office. How did this get your, you know, uh, candidly, I saw the attorney general of, uh, uh, of the District of Columbia, Washington DC do this lawsuit. I was just talking to him last night actually. And, uh, we are now the only two, attorneys general in the country that are doing it. I believe there's also a class action lawsuit, uh, by, by renters. Uh, that, that is, uh, that it's out there. Um, I'm gonna encourage my fellow attorneys general, uh, whether they're Republican or Democrats to, to do this lawsuit. I mean, this is, this is a company that I believe, uh, dominates about 90% of the total rental market in the country or at least in major urban areas. Um So it's not just a problem in the state of Arizona. How much do you think um your average lecture was paying ontology war? You know, that's something that is also a great, uh a great question and it's something that we're, we, we are gonna get to the bottom of through the course of discovery in the lawsuit. We know that Real Page made hundreds of millions of dollars off of this scheme. Um But we really need, we're gonna have to do a lot of work through discovery and through litigation to find out exactly how much individual renters uh lost. But it's a lot of money when you really think about it. And it's so incredibly insidious um that, you know, these, you know, one of the other things that we allege in the lawsuit is that the um the landlords were instructed by Real Page to tell renters um who were complaining about rent increases that it was just too, it's too hard to move and to, and it is hard to move. It is very, anyone who has tried to move recently can tell it's really hard to move. It's expensive. It's gonna cost you hundreds if not thousands of dollars. How do you get out of your existing lease? And so they were instructing these landlords to remind people how hard it is to move. Um, and you know, even though these renters were experiencing, you know, upwards of 15% rent increases, um you know, in a given year. And so that, that is one of the most, I think insidious aspects of this behavior. Kind of a follow up to that. We recently did a report that prices, rent, prices were up 30% evictions we covered are up a lot. How do you think this will have a lasting effect on the rental market? I I hope that when we are successful, it will uh reduce the number of evictions. It will uh keep money in the pockets of, of Arizonans who are renting. Um You know, these companies didn't care about evictions because uh you know, they were so so um callous and so uh mean spirited and frankly immoral, they did not care about the fact that people were being evicted because they could just continue to raise rent on everybody else and they knew that they were gonna continue to make profits even um when people were being evicted and even when people were leaving their buildings because everybody else who stayed saw their rents uh go go up. The other thing that happened uh has happened under Real page is that, you know, in a, in a normal competitive situation, rental situation when uh when supply is when, when, when units are empty and supply is down, right? Prices would go down in an economic depression or recession, you would think prices would go down. But what real page figured out and what it was able to do through its algorithms is it's, it figured out. Well, if I get all these landlords to collude to set a set price, then no one will go down in price, no one would, will deviate. In fact, they were telling these landlords don't deviate from the high price that we're setting for you. Um And as long as everybody stays together, as long as all these landlords stuck together and didn't lower prices like a normal competitor would do, then they were gonna be ok with that high price and that people would be forced to pay it. Um or, you know, go to some other city perhaps. How would you cut the light on this? What does this mean for, for rent rates moving forward? I mean, and then you also have the fact that the companies that weren't part of this, are they gonna lower their, their rents now back to what it should be or? Well, I, I think Well, first of all, I commend the landlords who didn't enter into this scheme, um because they're the good guys, they're the ones that, that uh that, that didn't participate in this. You know, obviously, uh my hope is that by shining a light on this, it will shame these companies to some degree, but I'm going to try to force them to stop and if a court orders them to stop using this algorithm and these, and, and this, this, this software that I think could have an immediate impact, I don't know how long this lawsuit will take. Um, obviously, it's gonna be a priority for this office because this is one of those, one of those lawsuits and one of those actions by an attorney general that, that, that can have an immediate impact when we win on people's pocketbooks and that's so important in this day and age in particular. So, is there like a 15% increase every time a contract would come up or was it kind of like it was a one time thing? Um, I think, I think the answer to that and I, maybe I can get Robert or others to, to speak to it. And I know we've got, but I think oftentimes it was not just a one time thing every time they renegotiated a contract. Yeah. Yeah. I mean, something like that. Yeah. And so it was every time they renegotiated and, and again, it was really kind of up to real Page. This was entered into a real page, some uh real page software. Um, the unit square footage of the unit uh and where it was located and then Real Page, on behalf of the landlord would say you should increase rents by this amount. All the other uh land managers or whoever they were. Did they know that they were colluding with the other uh properties or was it just kind of like we believe they did? It's hard to believe that they didn't know because they were all being that yes, we believe that they did no companies or, or some unit or some apartment complex or whatever, decided. No, I'm not gonna do that. Uh You know, that's a great question. I think that's also something that we will, uh, that we'll find out more in discovery. Um And we, we will, um, obviously bring those folks forward and want to interview those folks about what went into their decision making about why not to use a real page. Um But it's obvious that there were some uh good actors uh in Phoenix. But I think that the important thing here too is if you're a consumer, if you're a renter, how do you know? No one knew? I don't know how many people in this room rent, but my guess is you had no idea if you're in one of these buildings that, uh, the price was not actually set by the building owner, it was set by all of the competitors of that building owner via Real Page. And that's what's so insidious about this anyways. Yeah. But I think this is a big part of it, especially in the Phoenix area. Um, and it, and it's a, it's a fair question how much of this was caused by Real Page versus other factors. And I, I, you know, I'm, I'm not gonna stand before you and say that there weren't uh a few other factors, but real page was a huge part of it. And that's shocking to get this on your radar. Uh Well, rent and it has been on my radar and we've been talking about what I can do as attorney general uh to, to address this issue and evictions has been on my radar and it's, it's a really, it's been a, it's been frustrating. It's been really frustrating and we, we found uh this lawsuit that this other attorney general had done and decided that this was uh obvious that we wanted to look into it further. Um We have a great antitrust uh team here at the A GS office. We're working with some outside counsel as well. Um who know a lot about this issue and who brought some resources to it, including being able to do the regression analysis and the statistical analysis, all of this on your own without consumers, consumers came to, we've just had to, to some of our lawyers. Yeah, but again, the consumers themselves were not aware of what's happening with real page. I mean, you know, when you read the complaints, when you, when you read this, read this complaint, which I've dog eared here, um, you know, you, you see that a lot of the evidence that we've gathered is actually publicly available evidence. They were talking, the, the companies, the companies were actually talking about the algorithm and how much money it was going to make them to their investors in earnings calls. But when you really think about it, how many average renters are scouring earnings calls of major corporations. We're not doing that. We're just thinking that we're dealing with honest landlords, but in fact, they, we haven't been dealing with honest landlords. We've been dealing with dishonest, so dishonest software company and landlords that were colluding with that company and each and each other. And as you mentioned, you know, a lot of people probably had no idea that they were paying more than what was actually said because of this whole scheme. But now they will, after seeing all those dots on that map, after seeing this press conference and all the stories we're covering here today, they say, hey, I'm living at an A MC complex or one of those at your and I'm worried I'm paying more even with this lawsuit, are they still have to pay that amount until this whole thing is settled. Is there anything Yeah, I mean, that's a great question. We'll see if we can get any immediate relief through the courts or quick relief that that remains to be seen. Um We, what I would say is we would love to hear from people who are in these buildings so please contact our office. You can go to a zag.gov. Um Laura, is there a particular forward slash complaints? If you think you're in one of these buildings? If you're looking at this map and you think uh you could be one of these victims, then we would like to hear from you and get your uh get your uh testimonial. Does, does this apply only to uh like residential rentals or does it also apply to other rentals like storage facilities? Things like that? Not yet, but it's an interesting idea it applies to apartment renters. Um And certainly I'm very interested in looking at how at uh homes and what's going on there. We we now know that I think one out of every three home is in is owned by an investor. Um So I think it's a fair question to ask about homes, storage units. Honestly, I hadn't thought about yet, but uh I think it's fair, you know, given, given the, the involvement of Wall Street of, of algorithms of A I now in this space, I think it's fair to ask uh a lot of hard questions about what's going on out there is in the formation of this conspiracy. Uh Is it with the evidence that collected thus far, that it was real page that would come up to these landlords and solicit them to engage in this? Is that a? Yeah. Well, that's a good question as well. I think that's, it's more likely than not that that was the, the way this developed that, that the, that real page solicited landlords. I think over time, it sort of became probably common knowledge in the industry that this was a way to keep your rents high. Um Real page was certainly in conferences in earnings calls bragging about how much they could increase revenue and profits for the landlords. Um And, and you know, landlords who were a part of the conspiracy were also told that they were not allowed to deviate from it and that deviating from it would hurt everybody in that, in, in the landlord space. Yeah, sorry. We'll go over here how many individuals or families. Um I, we, we, we don't have a precise figure. We know that it's hundreds of thousands of families that were, were impacted. We're gonna have to get and I think that's an extremely conservative figure. I think we're gonna have to get uh AAA better number through the course of the litigation and through the course of the discovery that we will do in this case. But it's hundreds of thousands of Arizonans who've been harmed and who've been cheated out of probably uh uh tens of millions of dollars uh if not far more than that. Yes. Again, just looking at the map, you can see it takes over all the value. But I wanted to ask, did you notice, was it specific um people could rent at a specific income? The reason I ask is because in the photo you showed, you showed they look like really fancy apartments. So I didn't know. Did you also notice like in low income areas? This was also happening as well? Yeah, I think it's in all neighborhoods. I mean, when you look at the uh yeah, those, those were just illustrative pictures. Um uh but I think if you look at, if you look at this map, it's everywhere. It's Sun City West, it's down in South Mountain. It's, it's in the East Valley, it's in Mesa, it's in Apache Junction. It's up in uh you know, uh the, you know, up in the North Phoenix, it's uh in central Phoenix. It's everywhere. So this covers all demographics and economic situations. Which one? No, I mean, they're not out of business. We've just filed a lawsuit so we definitely wanna see change in this industry. Yeah, there's an there uh good question. I was just talking to the DC A G last night. Um They're a little bit further along in the process. I think they filed their lawsuit in November. So we'll be right behind them and we won't done lots of stories with homeless who I got my went so hot. I kicked out, I got kicked out and now I'm on the streets, you know, so many people's lives have been possibly destroyed by this. What does this mean for them? Yeah, I, I did. I mean, that's why I think this, this, this lawsuit is so important. I mean, I don't think it's a stretch to say that people were made homeless by this scheme. Um People, a lot of people live paycheck to paycheck and can barely make their rent and rents have been incr artificially jacked up by multiple percent per year in some cases by these landlords. And so I don't think it's too much to say that that, that it's had a dramatic um and terrible impact on a lot of Arizonans and we don't know yet the extent of that, but it's something that we will uh drive towards in the litigation. Can I ask you mentioned uh earlier, kind of uh you know, the insidiousness of this scheme? And I think in the end, you, you mentioned, you know A I two and um I think it's interesting, this comes at a time when, you know, we're kind of in AAA revolution and being able to hide behind an algorithm and say, you know, like, oh, this is just, you know, it's optimized and it's technology that figures it all out. Like, do you see this as kind of a key moment in you know, a new antitrust era of where we are critical of those kind of technologies. Yeah, I think it's important to challenge uh the use of this technology in this way to, to harm Arizonans and, you know, I, I've made it clear that I intend to utilize Arizona's antitrust laws um and to support the FTC when they're doing it, as, you know, we joined with the FTC a few days ago in opposing the Kroger Albertsons merger. Um, but this is a case where, you know, software and A I was being used in what is, can only be described as an immoral fashion. And, um, and it's my job to stand up for, uh, average Arizonans against that and to try to prevent it. But, yeah, I mean, it's, this is, you know, they, I think they, um, they, you know, they knew what they were doing, they knew that they could use technology to, to jack up their profits at the expense of Arizonans. And, um, that is absolutely, uh, not ok. I can ask a follow up too. I, I'm, I've been interested by this story kind of, you know, I mean, before, before, like, I've just been around some of these nice new apartment complexes where it's like empty, you know, but they're charging pretty high rent and we have this crazy, uh, homelessness crisis. Um, like, can you, can you speak to that? Yeah. Well, I mean, that's, um, I think that's something that we'll do as part of the litigation. But that's when, you know, when we were, uh, you know, developing this, this lawsuit, that is one of the most shocking aspects of it, which is landlords have now become, it almost seems unconcerned about vacancy rates because they know they can get that high rent from everybody else who stayed. And, um, and, and so it used to be landlords would be worried about vacancy rates and they would be worried about being able to compete against the landlord next door because maybe the landlord next door would lower his or her prices in order to get someone to move into that building. Well, now they don't have to worry about any of that because they're all charging the same high rent and they aren't deviating from it because Real Page tells them not to and sets the price. They have completely eliminated a competitive market in the Phoenix and Tucson areas. Um I, you know, renters are not dealing with a competitive market, they are dealing with a monopoly that is engaged in anti competitive price fixing and not just probably in Arizona but all across the country. Stacy. Sorry. Yeah. Oh, there are more than that. We, we, we think there are others. Um There are nine that are named in this lawsuit. We identified the, the nine that, that are, that have the highest um uh density, the highest number of renters. These are the nine largest, there are others in Arizona and we're, we will have to assess that um As we go along if we find other markets uh in Arizona, ie other cities that are impacted by, by that. Uh We will look at whether we can amend the complaint to add those markets and those additional landlords. Any other questions? Ok. Thank you guys for coming. I really appreciate it. Thank you.
