Zillow, Redfin Slump on State Antitrust Lawsuit
Online real estate giants face legal action from five states and the FTC over an alleged deal to suppress rental market competition.
Shares of online real estate leaders Zillow and Redfin tumbled this week after five states and the Federal Trade Commission filed lawsuits alleging the companies engaged in an illegal agreement to stifle competition. The legal action triggered a sell-off, with Zillow's stock (Z) dropping 4.5% and Redfin (RDFN) falling 3.8%.
The lawsuits, filed by attorneys general in Virginia, Arizona, Connecticut, New York, and Washington, center on an alleged unlawful agreement aimed at dominating the online rental housing market. Regulators claim Zillow paid Redfin approximately $100 million to exit the rental advertising business, effectively eliminating a key competitor. and consolidate market power.
At the heart of the complaint is the accusation that Redfin agreed to terminate its rental advertising contracts and cease competing with Zillow for up to nine years. In exchange for the payment, Redfin's rental sites would essentially become duplicates of Zillow's offerings. that will likely lead to higher advertising prices for property managers and fewer choices for renters seeking homes.
Both companies have disputed the allegations. Zillow has maintained that its agreement with Redfin is pro-competitive and expands access to listings for renters. Redfin echoed this sentiment, stating the partnership has increased listing access for its users. The government, however, is seeking to undo the agreement, a move that could force a significant restructuring of the partnership.
The legal battle introduces significant uncertainty into the online real estate sector, which has already been navigating a volatile housing market. Investors are now weighing the potential financial and operational fallout from a protracted legal fight with both state and federal regulators. The outcome of this case could reshape the competitive landscape for how properties are advertised and found online, in a market critical to millions of American renters.