The Federal Trade Commission (FTC) has initiated legal action against real estate giants Zillow and Redfin, alleging that the two companies have engaged in an unlawful agreement designed to stifle competition in online rental advertising. The lawsuit, filed on Tuesday, contends that this arrangement commenced in February when Zillow transferred $100 million to Redfin. In return for this substantial financial commitment, the FTC claims that Redfin consented to terminate contracts with its advertising partners and agreed to refrain from competing for multifamily property advertisements for a period of up to nine years. Moreover, Redfin is accused of agreeing to syndicate Zillow’s listings on its own platforms.
Shortly after this strategic arrangement was publicized, Redfin reportedly dismissed hundreds of employees, with further allegations suggesting that the company assisted Zillow in selecting “its pick” of these workers. Daniel Guarnera, the director of the FTC’s Bureau of Competition, emphasized that Zillow’s substantial payment was aimed at neutralizing Redfin as an independent competitor in an already saturated advertising market, a sector pivotal for renters, property managers, and the overall vitality of the U.S. housing market. Guarnera asserted that the actions taken by both companies violate federal antitrust regulations.
The FTC argues that this alleged agreement diminishes competition in a market already characterized by concentration, likely leading to increased rental advertising costs for properties with more than 25 units. The lawsuit suggests that the arrangement reduces incentives for both companies to enhance the user experience on their platforms for renters.
Zillow, known for its significant presence in the real estate sector with approximately 227 million unique monthly visitors, defended its actions in a statement, asserting that the listing syndication agreement with Redfin benefits both renters and property managers. The company characterized the deal as “pro-competitive and pro-consumer,” claiming it has increased accessibility to multifamily listings.
On the other hand, Redfin, which recently became a part of Detroit-based Rocket Companies, expressed strong disagreement with the FTC’s accusations and declared confidence in its ability to prevail in court. Redfin reiterated that the collaboration with Zillow expanded access to rental listings for users and provided advertising customers with greater exposure to potential renters. The company also highlighted that by the end of 2024, it had assessed its advertising capacity and determined that maintaining its rentals sales team was no longer financially justifiable.
The FTC contends that the partnership between Redfin and Zillow does not align with the narrative promoted by the two companies. This legal dilemma is not the first time Zillow has faced scrutiny over alleged anticompetitive practices in 2023. In June, the brokerage Compass accused Zillow of implementing an exclusionary policy that targets private home listings by claiming that any off-Zillow marketing for more than one day would result in those homes being banned from listings on Zillow and its affiliates, including Redfin.
The FTC, which voted 3-0 in favor of proceeding with the complaint, is seeking a court order to terminate the alleged agreement between Zillow and Redfin. Additionally, the agency is exploring other legal remedies, such as potential divestiture of assets or restructuring of business operations, to reinstate competition in the market.
