FTC Settles Antitrust Case Against Zillow and Redfin

Not long before the trial was about to start last month, the Federal Trade Commission (FTC), along with five state attorneys general, reached a settlement in their antitrust case against Zillow and Redfin. This outcome was a considerable achievement for the FTC, though it seems that there’s still a significant amount of work ahead.

In fact, over 30% of American households rent their homes. For many, the process of finding a place to live often begins and ends in the ecosystem of one company, which can conflict with antitrust rules and regulations.

The settlement reached, however, does not actually address the fundamental issue of rent costs for everyday people.

To provide some context, the government was able to negotiate a substantial settlement. In a deal valued at $100 million, Zillow had compensated Redfin to dissolve its multifamily rental advertising operations, along with customer and salesforce transfers, agreeing to refrain from competing in the market for a period of up to nine years. That arrangement is now null and void. Now, Redfin has six months to reactivate its previous business and will need to feature Zillow’s listings through a partnership that will last until at least 2030.

This outcome is arguably more beneficial than other potential options, like imposing a fine, which generally fails to rectify underlying issues. Large monopolies often manage to absorb such penalties and continue noncompliant practices. Enforcing tangible changes is essential for a more effective resolution.

It’s worth noting that this was a rather straightforward antitrust case. The agreement between Zillow and Redfin constituted a clear breach of fundamental antitrust principles, as the firms essentially agreed not to compete, coupled with a hefty financial incentive.

The FTC wasn’t alone in advocating for this outcome; attorneys general from states like Virginia, Connecticut, New York, Washington, and Arizona were also involved. Following the alterations in the agreement, FTC Chairman Andrew Ferguson celebrated this result as a vital advancement in housing policy during the Trump administration.

However, framing it this way could be seen as problematic for those who champion antitrust policies. The matter was primarily about property management with regard to rental listings and didn’t really tackle the actual costs of housing for the average person. It seems that a case regarding housing advertising is being presented as if it were one about housing affordability.

But let’s consider what the settlement still allows.

Zillow continues to manage Zillow Rentals, Trulia, and HotPads. While restoring Redfin’s operation is a significant win, simply abolishing the original deal doesn’t resolve other persistent issues as there is still so much left to tackle.

Additionally, Zillow’s influence expands beyond rental listings, seeping into the homebuying process through questionable “tying” practices. In ongoing class action antitrust suits against Zillow, it is claimed that the company uses its dominant position in buyer leads to pressure real estate agents into directing clients toward Zillow Home Loans. By tying access to essential consumer leads with the requirement that agents persuade clients to utilize Zillow’s lending service, the platform effectively marginalizes independent lenders, depriving buyers of competitive mortgage options.

Similarly, Redfin has its own complications, being owned by Rocket Companies, which also owns Mr. Cooper—a leading mortgage servicer in the U.S., raising additional antitrust concerns. This connection has already attracted scrutiny from some congressional members.

That being said, it’s not that the FTC was wrong to finalize this settlement; rather, the necessary work is far from complete.

Yes, it’s possible that renters could see slight reductions in their expenses over time as some effects trickle down; however, that’s a slow process and is arguably the most roundabout way to address rent prices or curb their increases.

Looking ahead, there are three avenues for the federal government to reinforce its gains.

• First, it could leverage its 6(b) authority under the FTC Act to analyze the broader rental listing market, including pricing, exclusivity deals, syndication conditions, and potential illegal tying practices linking lead generation with home financing.
• Second, the FTC needs to clarify that exchanging preferential access for exclusivity, even without financial transactions, shouldn’t be deemed automatically permissible. What Zillow and Redfin engaged in would have been illegal regardless of the bribe.
• Finally, Congress and state regulators should stay alert to developments leading up to 2030. Zillow and Redfin will likely spend the coming four years strategizing how to legally reconfigure their partnership; it’s crucial that elected officials actively prevent them from succeeding.

The FTC started strong, but it has a considerable journey ahead. In the next few years, it is vital for the agency to focus on anti-competitive tying and finish the work on housing affordability.