Zillow Group stock market graphics will appear on February 21, 2021 on smartphones with the Zillow logo in the background.
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The Federal Trade Commission is suing real estate giant Zillow and redfinpleaded two people illegally conspired to reduce competition in the online multi-family rental listing market, the agency said Tuesday.
In the complaint, the FTC alleges that the company violated federal antitrust laws earlier this year, when Zillow paid Redfin to essentially rehost Redfin and its site’s Zillow multi-family rental list.
Zillow and Redfin-owned platforms such as Zillow Rentals and Rent.com are used by millions of Americans looking for their next home, the FTC says.
As part of the arrangement, the agency said it agreed that Redfin would terminate its agreement with existing advertising customers and that it would help Zillow acquire the business. Redfin has also pledged to leave the apartment complex advertising market for up to nine years, and to make Redfin’s site virtually identical to Zillow’s site by simply syndicateing its role.
The FTC also claimed that Redfin fired hundreds of employees shortly after the contract was signed, and then helped Zillow selectively rehire many of them.
“Paying back your competitors to stop competing with you is a violation of federal antitrust law,” Daniel Guarnara, director of the FTC’s Department of Competition, said in a statement. “Zillow has paid millions of dollars to eliminate Redfin as an independent competitor in the already concentrated advertising market, which is critical to the health of tenants, real estate managers and the overall U.S. housing market.”
Following the FTC announcement, shares in Zillow and Redfin’s parent rocket company fell sharply in afternoon trading.
“The listing syndication with Redfin has benefited both tenants and real estate managers, increasing access to multi-family listings for renters across multiple platforms,” a Zillow spokesperson said in a statement. “It’s a competitive friendship by connecting property managers with higher intentional tenants, filling the vacancy and allowing more tenants to return home, and we are confident in this partnership and the increased value it has provided and continuing to provide consumers.”
Redfin did not immediately respond to CNBC’s request for comment.
The FTC’s lawsuit aims to unlock the contract and can include the requirement for a sale or restructuring to recover competition in the rental advertising market.
