The Federal Trade Commission (FTC) announced it has filed a lawsuit against Zillow and Redfin over an alleged illegal anti-competitive agreement made between the two portals. The complaint was filed today in the U.S. District Court for the Eastern District of Virginia Alexandria Division.
The FTC alleged that in February, Zillow and Redfin “entered into an illegal agreement to dismantle Redfin as a competitor in the ILS (internet listing service) advertising market for multifamily rental properties.” The breakdown of the deal is that Zillow allegedly paid $100 million (and other benefits) to Redfin to end its advertising customers’ contracts, stop competing in the multifamily advertising market for up to nine years, and serve as an “exclusive syndicator” of Zillow listings.
“In effect, Defendants have agreed to transform Redfin from an independent and vibrant competitor that markets and sells its own ILS multifamily advertising into one of several websites that provide nothing more than a copy of Zillow’s ILS listings,” the court filing stated.
In completing the deal, Redfin also fired “approximately 450 employees…associated with the ILS advertising business,” and agreed to assist Zillow in hiring them, the filing stated.
This agreement, as the FTC states, is an unlawful anti-competitive agreement in violation of Section 1 of the Sherman Act, and an unlawful acquisition in violation of Section 7 of the Clayton Act.
“Paying off a competitor to stop competing against you is a violation of federal antitrust laws,” Daniel Guarnera, director of the FTC’s Bureau of Competition, said in a release. “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. The FTC will do our part to ensure that Americans who are looking for safe, affordable rentals receive all the benefits of robust competition between internet listing services like Zillow and Redfin.”
The FTC stated that this agreement harms property managers who want to advertise their rental listings by “destroying” competition for multifamily rental properties.
“The practical outcome of the agreement is obvious: Redfin has terminated its existing multifamily advertising business operations and, for the duration of the agreement, has stopped competing to provide ILS advertising for multifamily properties,” the filing stated. “The wholesale elimination of critical competition in this highly concentrated space will harm rental advertisers and the Americans who rely on ILSs to find their next home.”
Specifically, the FTC alleges that the agreement will “likely lead to higher prices and worse terms for multifamily unit advertising,” and “reduce incentives for Zillow and Redfin to compete for renters, including through investment in attracting visitors and innovation to improve user experience when searching on an ILS for a rental property.”
A Redfin spokesperson said that the company “strongly disagrees with the FTC’s allegations” and is “confident we will be vindicated by a court of law.”
“Our partnership with Zillow has given Redfin.com visitors access to more rental listings and our advertising customers access to more renters,” they continued. “By the end of 2024, it was clear that the existing number of Redfin advertising customers couldn’t justify the cost of maintaining our rentals sales force. Partnering with Zillow cut those costs and enabled us to invest more in rental-search innovations on Redfin.com, directly benefiting apartment seekers. ”
With the lawsuit, the FTC stated it is looking to put a stop to the agreement through any methods necessary, such as the “potential divestiture of assets or the reconstruction of businesses,” to restore competition. The FTC also wants to create preventative measures with the companies to stop any future anti-competitive actions, such as Zillow and Redfin filing “periodic compliance reports.”
Zillow did not respond for comment at press time.
