States Sue Zillow, Redfin Over Multifamily Listing Pact

Zillow and Redfin are facing fresh legal fire after five states filed an antitrust lawsuit accusing the firms of carving up the rental listing market, one day after the Federal Trade Commission sued on similar grounds.

Attorneys general from New York, Arizona, Connecticut, Washington and Virginia filed suit Wednesday, alleging the rivals schemed to eliminate head-to-head competition in apartment advertising, CNBC reported. The lawsuit escalates scrutiny of the $100 million deal the two companies announced in February, when Redfin agreed to only syndicate multifamily listings from Zillow on its website, as well as its other platforms, Rent.com and ApartmentGuide.com.

The February pact effectively paid Redfin to shut down its rentals platform and funnel clients to Zillow, insulating Zillow from competition, according to New York AG Letitia James. Redfin allegedly laid off hundreds of staff in the process, then worked with Zillow to rehire some.

“This agreement is nothing more than an end run around competition,” the complaint states.

The two firms, along with CoStar’s Apartments.com, dominate the rental listings market, together controlling about 85 percent of revenue, James’ office said. By sidelining Redfin, regulators argue, Zillow could squeeze multifamily advertisers and limit renters’ options in an already tight market.

The AGs are seeking an injunction to unwind the alleged scheme and even floated restructuring as a remedy to restore competition, similar to what the FTC is demanding.

Both companies rejected the allegations. Redfin called the partnership a cost-saving measure that expanded listings for consumers, while Zillow claimed the deal was “pro-competitive and pro-consumer” by better connecting landlords with renters.

Still, the lawsuits landed a punch on Wall Street: shares of both firms dipped after the twin actions from the FTC and state AGs.

The FTC complaint argues that by agreeing to the deal, Redfin steered its advertising customers to Zillow and vowed not to compete with the company for at least nine years.

The agency argues that with fewer competitors, Zillow could be dissuaded from improving its platform and could drive up the cost of advertising multifamily listings.

Rumors that the FTC was probing Zillow and Redfin emerged in May.

— Holden Walter-Warner