Five states are now joining in the federal legal challenge to last spring’s Zillow-Redfin rental merger, characterizing the $100 billion deal as anti-competitive and anti-consumer as law enforcement seek to block the deal.
The states joining in the lawsuit are Connecticut, Arizona, Washington, Virginia and New York filing the suit in the Eastern District of Virginia today.
“This unfair and anticompetitive agreement between listing giants Zillow and Redfin will jack up costs for property managers, who will pass those costs on to renters,” said William Tong, Connecticut’s attorney general, in a statement. “We’re going to continue to use every inch of our joint state and federal law enforcement authority to give families a fair shot at an affordable home.”
Yesterday, the Federal Trade Commission (FTC) filed a similar lawsuit.
In a statement shared with RISMedia, a Redfin spokesperson said the company “strongly disagrees” with the allegations in the lawsuits and is “confident we will be vindicated by a court of law.”
“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,” the spokesperson said.
The merger made waves earlier this year, with Zillow paying $100 million to essentially make Redfin’s rental platforms syndicators for Zillow’s listings. Redfin touted the deal as necessary as it sought to “restructure” after several tough years.
But according to the attorneys general, the deal was actually a way for Zillow to buy its way into a monopolistic position in the rental market, with the lawsuit noting that Redfin turned over an “array of competitively sensitive…information” as part of the deal, arguing that “Zillow (paid) Redfin at least $100 million to stop competing.”
“This agreement between Zillow and Redfin not to compete is illegal,” said Virginia Attorney General Jason Miyares in a statement. “Zillow paying Redfin to exit the market harms renters and property owners by taking away free market incentives to provide high-quality services that businesses and consumers rely on.”
Redfin disputed this claim directly, with a spokesperson saying that the “partnership…has given Redfin.com visitors access to more rental listings and our advertising customers access to more renters.”
The lawsuit claims that the deal does not have any of the hallmarks of a “partnership,” noting that it does not require the companies to pool resources or share risks. Redfin was also required to help transition customers to Zillow after shuttering its own services.
The market for online rental advertising is already “highly concentrated,” the lawsuit claims, with CoStar and its Apartments.com business the only other “meaningful” provider of rental listings. Customers looking to advertise rentals are likely to face “immediate price increases or worse quality service” due to the merger, and renters themselves will eventually lose out based on the alleged decrease in competition.
The attorneys general are asking for the court to prevent Redfin and Zillow from “continuing to engage in the anticompetitive conduct” and “(e)nter structural relief as needed to cure any anticompetitive harm, prevent any future harm, and undo the continuing effects of past harm,” including regular compliance reports.
Representatives from Zillow and Redfin could not immediately be reached for comment.
Editor’s note: this story was updated with a response from a Redfin spokesperson at 1:55 p.m. eastern time.
