Door County municipalities which require short-term rental permits should consider what to do about software-based dynamic pricing systems
The U.S. Justice Department and eight states are pursuing a civil case under the Sherman Act against RealPage: https://www.yahoo.com/news/enable-landlords-sidestep-competition-doj-112704560.html
Wisconsin is not one of the states: https://www.justice.gov/atr/case/us-and-plaintiff-states-v-realpage-inc
This legal action coincides with a broader agenda about rental property released by the White House: https://www.whitehouse.gov/briefing-room/statements-releases/2023/01/25/fact-sheet-biden-harris-administration-announces-new-actions-to-protect-renters-and-promote-rental-affordability/
RealPage is a commercial real estate software company, which, among other things, is involved with short-term rentals: https://www.realpage.com/migo-home-sharing/
Although this case is against RealPage specifically instead of the property owners using its software, there are also a number of separate lawsuits against property owners which used RealPage software for pricing their rents. The outcome of the RealPage case should be expected to affect the outcomes of the various lawsuits against the property owners.
On May 22, 2024, a corporate landlord’s offices were raided by the FBI: https://www.entrepreneur.com/business-news/realpage-rent-price-fixing-probe-escalates-with-fbi-raid/475109
This article focuses on lawsuits against property owners in the San Francisco Bay area: https://www.mercurynews.com/2024/08/26/tenants-say-bay-area-landlords-colluded-to-inflate-rents-now-the-department-of-justice-is-involved/
The Sherman Act case appears to only be about ordinary rentals, not short-term rentals. However, if it is decided in favor of the government, the precedent it sets could also be used to crack down on dynamic pricing services used for short-term rentals. There are already two lawsuits involving hotel operators which have used dynamic pricing software: https://popular.info/p/how-hotels-are-colluding-to-jack
To consider the other side, this is a discussion, written by a software company employee, which argues that it is legal to use software-based dynamic pricing for lodging: http://www.wasar-ah.org/cloudbeds-algorithms-set-hotel-rates-illegal.html
Some short-term rentals in Door County are using dynamic pricing. Note that just because a business is quoted below, does not mean it is necessarily breaking the law. Also consider how the RealPage case itself hasn’t been decided yet.
With the ongoing rate pressures, a property manager’s use of dynamic pricing and revenue management software is non-negotiable.
https://docovacations.com/the-dynamic-state-of-the-vacation-rental-market-in-door-county/
Shortly after, DoCo activated PriceLabs, a robust dynamic pricing algorithm. Daily, PriceLabs calculates the optimal rates for all of DoCo’s properties. PriceLabs then uses the Hostfully PMP to update prices on all the distribution channels (i.e., Airbnb, Vrbo, HomeToGo, DoCo’s direct booking site, etc.)
https://www.hostfully.com/case-studies/integrations-automation/
We use dynamic pricing, so each night is priced differently depending on seasonality, day of the week, local events, etc.
https://www.rockyshoresretreat.com/rates
We employ dynamic pricing strategies and monitor market trends to optimize revenue while maintaining competitive rates.
https://thebirchstays.com/property-management
We utilize a dynamic pricing model that adapts to market trends in real-time.
https://simpleliferentals.com/2025-green-bay-draft-rent-your-home
Summer uses a combination of dynamic pricing and individual pricing reviews.
https://www.gosummer.com/vacation-rental-management/sturgeon-bay-wisconsin
Door County municipalities which require short-term rental permits are listed at https://doorcountytourismzone.com/municipal-requirements:
This list of quotes should encourage reflection by members of these municipal governing bodies. Software-based dynamic pricing systems have the potential for being used in ways that don’t violate the Sherman Act, but their opacity makes these systems susceptible to violations. How are property owners or managers supposed to even know if the software behaves in an illegal manner or not, when the algorithm is proprietary to the company they are using?
The state code regarding municipal permits, 66.1014(2)(d)2.b., appears broad in scope. Municipalities are not restricted about what topics they may establish rules about for their permits, although something irrational could be challenged and struck down by courts, possibly for violating due process.
It would not be irrational to respond to the RealPage case by adding a prohibition on any use of software-based dynamic pricing systems to municipal short-term rental permit requirements, allowing for a single exception.
The exception would be for any software system for which the short-term rental operator can prove, in writing, that it is incapable of collusion which is forbidden under the Sherman Act. Because the software is proprietary, no operator will presently be able to meet the requirements for this exception.
The prohibition could be enforced by revoking the permit of any short-term rental operator found to be using software-based dynamic pricing. Customers or the general public would be able to submit complaints for consideration, just as with other aspects involved with the short-term rental permits.
In the situation involving RealPage, residential rental prices remained high despite a rise in the vacancy rate. Because this violated the principle of supply and demand, it is being used as evidence against RealPage. Prohibition sounds easier to enforce than trying to figure out after the fact if collusion is making prices unresponsive to supply and demand.
Dealing with the situation soon and at the local level should reduce the risk of legal trouble eventually affecting short-term rental businesses in a negative manner. Protecting the interests of existing and prospective tourists in getting rates without collusion is good PR and should help maintain consumer confidence. It may also serve to level the playing field for short-term rental operators who have never relied on software algorithms to change their prices.
It is possible that a short-term rental operator could challenge a permit requirement in court, following the example set in Adam White et. al. vs. Village of Sister Bay et. al., https://doorcounty.substack.com/p/weber-injunction-captain-s-cottage-sister-bay.
Any municipality willing to prohibit software-based dynamic pricing would need to weigh the advantages and against the risks.
However, it seems that any operators tempted to challenge the algorithm would probably rather avoid drawing publicity to their use of software-based dynamic pricing. Because the algorithm used by the software is proprietary information, that could make it difficult for any short-term rental operator to establish the “preponderance of the evidence” necessary to win a lawsuit against a municipality. Even if more information became available about the software during a court proceeding, it could end up backfiring against the short-term rental operator if it turned out that the software was written in a way that encourages violations of the Sherman Act.
Posts relating to short-term rentals
https://doorcounty.substack.com/t/short-term-rentals