The U.S. Federal Trade Commission (FTC) has initiated a lawsuit against real estate giants Zillow and Redfin, accusing the companies of engaging in an illegal agreement to reduce competition in the online market for multifamily rental listings. The federal agency announced the legal action on Tuesday, citing violations of federal antitrust laws.
At the heart of the complaint is a $100 million payment from Zillow to Redfin. The FTC alleges this payment was part of a deal for Redfin to exit the multifamily rental advertising business and instead feature Zillow's listings on its platforms, effectively eliminating a key competitor from the market.
Key Takeaways
- The Federal Trade Commission is suing Zillow and Redfin for allegedly violating federal antitrust laws.
- The lawsuit centers on a $100 million payment Zillow made to Redfin earlier this year.
- Regulators claim Redfin agreed to stop competing in the multifamily rental advertising market for up to nine years.
- The FTC seeks to undo the agreement to restore competition for renters and property managers.
Details of the Alleged Agreement
The FTC's complaint outlines a detailed arrangement between the two real estate technology companies. According to the lawsuit, the deal required Redfin to stop its independent operations in the multifamily rental advertising space. Instead, Redfin's website and associated platforms would syndicate, or re-host, rental listings directly from Zillow.
This move, regulators argue, made Redfin’s rental search results nearly identical to those on Zillow-owned sites like Zillow Rentals and Rent.com. Millions of Americans use these platforms to find rental properties, making the market for listing advertisements highly significant.
As part of the transaction, the FTC claims Redfin agreed to terminate contracts with its own advertising clients. The agency further alleges that Redfin actively helped Zillow acquire those same clients, transferring business from one company to the other.
A Long-Term Market Exit
A central point in the FTC's case is the duration of the non-compete clause. The agreement allegedly commits Redfin to staying out of the multifamily advertising market for a period of up to nine years. This long-term commitment is seen by regulators as a clear effort to sideline a competitor rather than a pro-consumer partnership.
Background on Online Rental Listings
The online rental listing market is a critical component of the U.S. housing sector. Property managers and large apartment complexes pay services like Zillow and, formerly, Redfin to advertise their vacant units to a wide audience of potential renters. A competitive market typically leads to better pricing and more innovative services for these advertisers.
FTC's Stance on Market Competition
Federal regulators have taken a strong position against the deal, framing it as a straightforward buyout of a competitor. The agency contends that the agreement harms not only property managers who now have fewer advertising choices but also renters who benefit from a competitive and diverse online search environment.
“Paying off a competitor to stop competing against you is a violation of federal antitrust laws,” said Daniel Guarnera, director of the FTC’s Bureau of Competition, in a public statement.
Guarnera emphasized the importance of the market in question. “Zillow paid millions of dollars to eliminate Redfin as an independent competitor in an already concentrated advertising market—one that’s critical for renters, property managers, and the health of the overall U.S. housing market,” he added.
Impact on Employment
The lawsuit also highlights the human cost of the deal. According to the FTC, Redfin terminated hundreds of employees shortly after the agreement was finalized. The complaint further alleges that Redfin then assisted Zillow in selectively rehiring many of those same individuals.
Zillow Defends the Partnership
In response to the lawsuit, Zillow has defended its arrangement with Redfin, describing it as beneficial for consumers and the industry. The company argues that the partnership expands the reach of rental listings, ultimately helping both renters and property managers.
A spokesperson for Zillow provided a statement asserting the deal's positive aspects. “Our listing syndication with Redfin benefits both renters and property managers and has expanded renters’ access to multifamily listings across multiple platforms,” the statement read.
Zillow's position is that the agreement is pro-competitive. “It is pro-competitive and pro-consumer by connecting property managers to more high-intent renters so they can fill their vacancies and more renters can get home. We remain confident in this partnership and the enhanced value it has delivered and will continue to deliver to consumers.”
Market Reaction and Legal Outlook
The announcement of the FTC's lawsuit had an immediate impact on the financial markets. Following the news, share prices for both Zillow and Redfin's parent company, Rocket Companies, experienced a noticeable decline in afternoon trading.
The legal action seeks significant remedies to address the alleged harm to competition. The FTC has stated its goal is to unwind the agreement between Zillow and Redfin completely. This could potentially involve court orders requiring divestitures or other structural changes to the companies' operations to re-establish a competitive landscape in the rental advertising sector.
Redfin had not issued a public comment on the lawsuit at the time of reporting. The case will now proceed through the federal court system, where the FTC will need to prove its claims that the deal unlawfully suppressed competition in violation of U.S. antitrust statutes.
