What is hub and spoke collusion and how does it apply to multifamily revenue management?

What is Hub and Spoke Collusion?

Hub and spoke collusion refers to an anticompetitive arrangement where competitors coordinate their actions not directly, but through a third party or a central platform (the "hub") that facilitates the exchange of sensitive information or the coordination of business practices. In this setup, the competitors act as the "spokes" connected to the central hub. This type of collusion can be subtle and hard to detect because the companies involved may not communicate directly with each other about their anticompetitive practices. Instead, they use the hub as an intermediary to share information or strategies that influence market conditions, such as pricing, output, or other competitive parameters.

How Does it Apply to Multifamily Revenue Management?

In the context of multifamily revenue management, which involves the pricing and marketing strategies for apartment rentals or residential properties, hub and spoke collusion could occur if property management companies (the spokes) use a common third-party service or software (the hub) to share sensitive information like rental pricing, occupancy rates, or future pricing strategies. This could lead to anticompetitive outcomes such as artificially high rental prices, reduced availability, or uniform pricing strategies that harm consumers by limiting choices and inflating costs.

The relevance of hub and spoke collusion in multifamily revenue management is significant because many property managers rely on software and data analytics services to optimize their pricing and occupancy rates. If these tools are misused to facilitate collusion among competitors, it could undermine fair competition in the housing market. Regulatory authorities are increasingly aware of these risks and are vigilant in monitoring for signs of collusion facilitated by third-party platforms or services, to ensure that the real estate market remains competitive and fair for consumers.

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