The U.S. Federal Trade Commission (FTC) has filed a lawsuit against real estate giants Zillow and Redfin, alleging an illegal agreement designed to stifle competition in the online rental advertising market. The FTC claims a $100 million deal struck in February, where Zillow compensated Redfin, led to Redfin ending contracts with advertising partners and ceasing to compete with Zillow for multifamily property ads for up to nine years.
Key Takeaways
- The FTC alleges Zillow paid Redfin $100 million to reduce competition in rental advertising.
- Redfin reportedly agreed to stop competing for multifamily rental ads and to serve as a syndicator for Zillow listings.
- The FTC seeks to end the deal and potentially force divestitures or business reconstruction.
- Both Zillow and Redfin maintain the agreement is pro-consumer and pro-competitive.
The FTC’s Allegations
The lawsuit, filed on Tuesday, details an arrangement initiated in February when Zillow paid Redfin $100 million. According to the FTC, this payment was in exchange for Redfin agreeing to terminate existing advertising contracts, cease competing with Zillow for advertisements related to multifamily properties for a period of up to nine years, and act as a syndicator of Zillow’s listings on its own platforms. The complaint also notes that Redfin subsequently laid off hundreds of employees, with the FTC alleging the company facilitated Zillow’s hiring of these workers.
Daniel Guarnera, director of the FTC’s Bureau of Competition, stated that Zillow’s actions were aimed at eliminating Redfin as an independent competitor in an already concentrated advertising market. He emphasized the critical nature of this market for renters, property managers, and the broader U.S. housing market, asserting that the companies’ conduct violates federal antitrust laws. The FTC fears this "unlawful scheme" could reduce incentives for future competition, potentially leading to increased prices and diminished choices for customers in the multifamily rental advertising sector.
Company Responses
Zillow has defended the agreement, with a spokesperson asserting that the listing syndication with Redfin benefits both renters and property managers by expanding access to multifamily listings. The company described the arrangement as "pro-competitive and pro-consumer."
Redfin, which was acquired by Rocket Companies earlier this year, expressed strong disagreement with the FTC’s allegations and confidence in prevailing in court. A Redfin spokesperson reiterated that the partnership provided its users with greater access to rental listings and advertisers with access to more renters. The company also noted that by the end of 2024, it had determined that its advertising customer base could not justify the cost of maintaining its rentals sales force.
FTC’s Legal Action
Despite the companies’ claims, the FTC maintains that the agreement is not the partnership they describe. The Commission, which approved the filing with a 3-0 vote, is seeking court intervention to terminate the deal. Additionally, the FTC is requesting other forms of relief, which could include the divestiture of assets or reconstruction of business operations to restore competition.