The federal agency alleges the real estate giants broke antitrust laws when Zillow paid $100 million to become Redfin’s exclusive multifamily listings provider.
The Federal Trade Commission is suing real estate giants Zillow and Redfin, alleging the two illegally conspired to eliminate competition in the rental listings market.
In a Sept. 30 complaint, the federal agency alleges the companies violated federal antitrust laws when Zillow paid Redfin $100 million to have Zillow be the exclusive provider of multifamily rental listings on Redfin and its sites, Rent.com and ApartmentGuide.com.
“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 [Internet Listing Services] advertising for multifamily properties,” the filing says.
“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.”
A Zillow spokesperson said their listing syndication deal with Redfin is “pro-competitive and pro-consumer,” expanding “renters access to multifamily listings across multiple platforms” and connecting property managers to “more high-intent renters so they can fill their vacancies and more renters can get home.”
The complaint was filed in the U.S. District Court for the Eastern District of Virginia Alexandria Division.
The partially-redacted complaint notes that Zillow, Redfin and CoStar (through Apartments.com) dominate the rental listing space and “competed fiercely” for years before Zillow and Redfin made their deal in February. As part of that agreement, Redfin allegedly agreed not to compete with Zillow in the advertising of multifamily rental listings for up to nine years.
This means Redfin agreed to “stop selling multifamily advertising, to terminate its existing multifamily advertising contracts, and to transition those customers to Zillow,” including by turning over “competitively sensitive” information to Zillow, its “direct, horizontal competitor,” according to the complaint.
“Revenue from attracting new advertising customers will no longer serve as an incentive for Redfin to increase prospective renter traffic because Redfin will no longer be allowed or able to acquire new advertising customers,” the complaint says.
The Zillow-Redfin deal resulted in the termination of some 450 Redfin employees who had previously supported Redfin’s rental listing business. As part of the deal, Redfin agreed to help Zillow hire them, the complaint added.
“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 complaint says.
The “obviously anticompetitive” deal will mean “reduced choice, higher prices, and reduced quality” for multifamily rental advertising customers and such customers and renters alike would be better off through “continued competition to earn their business and engagement on the merits of Zillow’s and Redfin’s respective, independent offerings,” the complaint added.
The complaint alleges violation of the Sherman Act, Clayton Act, and FTC Act and seeks various forms of relief, including a permanent injunction against the defendants’ alleged anticompetitive conduct and “structural relief … to cure any anticompetitive harm, prevent any future harm, and undo the continuing effects of past harm, including but not limited to, divestiture of assets, divestiture or reconstruction of businesses, and such other relief sufficient to restore the competition that would exist absent the anticompetitive conduct.”
The federal agency also asks the court for an order requiring the Zillow and Redfin “to file periodic compliance reports with the FTC.”
Real Estate News has asked Redfin for comment.
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