Key Takeaways

  • RealPage enabled competing landlords to share sensitive market data and coordinate prices, driving apartment rents up to 25% above competitive market levels.
  • Kalibrate faces a class action in California after helping 1,700 retail gas stations align fuel pricing through automated software.
  • McDonald's keeps franchisees from undercutting each other by tying lease renewals and second-location approvals directly to algorithmic pricing compliance.
  • Coordinated pricing software effectively builds cartels across housing, food, and fuel without human executives ever meeting in a back room.

Algorithmic Software Acts as a Shared Pricing Cartel

When competitors sit in a private room and agree to raise prices, federal prosecutors call it price-fixing. When they send their proprietary data into the same cloud software and let an algorithm set the rates, companies claim it is merely market optimization. Lindsay Owens points out that the economic damage remains identical.

In residential housing, software from RealPage gave competing landlords a unified playbook. Owens explains the result: “So we saw RealPage, another case of algorithmic price fixing, where landlords in a city, who would usually compete with each other, were able to share competitively sensitive information and align on pricing, resulting in rent prices as much as 25% more than you would see in a competitive market through this software.”

A similar playbook operates at retail pumps. Owens points to Kalibrate, an automated pricing company facing legal heat. “Similarly, there's a gas station technology, Kalibrate, a tech company that is under scrutiny right now, a class action filed in California. They were helping 1,700 gas retailers align on price,” Owens says. When 1,700 separate gas stations take cues from the same engine, localized price competition disappears. Independent operators stop cutting pennies per gallon to win neighborhood drivers because the system disincentivizes undercutting.

Corporate Franchisors Use Algorithms to Kill Price Wars

Price competition does not erode only between separate corporations. In franchise networks, operators historically used pricing flexibility to compete for nearby foot traffic. If an operator ran an efficient kitchen, they could drop combo prices to steal volume from the location two miles away.

Corporate franchisors now treat that dynamic as a problem to solve. Owens notes that giant chains use software to enforce top-down conformity: “So even, you know, companies like McDonald's are building sophisticated algorithmic pricing tools to ensure that even franchisees can't compete against each other.”

Franchisees technically retain legal autonomy over their retail prices, but corporate headquarters enforces obedience through leverage. Owens breaks down how compliance gets policed behind the scenes: “When McDonald's is evaluating renewal decisions, when McDonald's is evaluating whether or not you as a franchisee can pick up another property and open a second location, they evaluate things like your conformity to the pricing algorithm.”

If you discount your burgers to move more volume, corporate flags your store. You miss out on opening a second unit, or you risk losing your franchise agreement when the contract expires. Algorithms stop serving as recommendations and start functioning as mandatory floors. As Owens warns, “When we don't have price competition in our economy, we're in real trouble.”

What to Do With This

Audit your pricing stack tomorrow for third-party dynamic engines that pool cross-seller data. If your software sets prices by ingesting private data from competitors in your niche, plan an immediate transition to standalone, internal models before antitrust enforcement spreads from housing and gas to B2B software and e-commerce.