With rent prices already going up in 2025, this news may not make Americans feel any better about the state of the rental market.
Zillow and Redfin, two online real estate companies, are being sued by both state and federal government officials. According to USA Today, attorneys general from five states have filed a joint lawsuit against the two companies, and the Federal Trade Commission has filed its own lawsuit as well (1).
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The lawsuits claim Zillow and Redfin engaged in an illegal scheme that was designed to stop competition in the online rental advertising business. This could increase the cost of advertising a rental property online, while leaving consumers with fewer options and potentially higher costs for rental units.
Zillow, Redfin accused of violating antitrust laws
Officials from Arizona, Connecticut, New York, Virginia and Washington — along with the FTC — claim that Zillow and Redfin violated federal antitrust laws, including Section 1 of the Sherman Antitrust Act and Section 7 of the Clayton Act.
These violations allegedly occurred when Zillow reportedly paid Redfin $100 million in order to shut down the latter’s online rental advertising business and transfer its clients over to Zillow. The lawsuits also allege that, as part of the deal, Redfin fired hundreds of employees before turning around and helping Zillow to rehire some of them.
"This agreement is nothing more than an end run around competition that insulates Zillow from head-to-head competition on the merits with Redfin for customers advertising multifamily buildings," states a portion of the lawsuit from the five states.
Unfortunately, if the two companies did in fact unlawfully collaborate, this could have negative consequences for consumers. This alleged scheme is believed to have the potential to drive up the cost of online advertising for rental units, and if it becomes more expensive for landlords to advertise, they may pass those costs on to consumers.
This could also leave consumers with fewer rental options, especially if smaller landlords can’t afford to advertise on a major rental listing website like Zillow.
The lawsuit seeks an injunction to prohibit Zillow and Redfin from engaging in the alleged illegal collusion and requests that the court mandate a "divestiture of assets or reconstruction of businesses to restore competition."
Zillow and Redfin, however, have denied the accusations and claim the partnership was necessary because Redfin didn’t have enough customers to maintain the cost of its rental sales force.
"Partnering with Zillow cut those costs and enabled us to invest more in rental-search innovations on Redfin.com, directly benefiting apartment seekers," Redfin shared in a statement, according to USA Today. "Our partnership with Zillow has given Redfin.com visitors access to more rental listings and our advertising customers access to more renters."
Zillow also agreed that the partnership was good for consumers, releasing an email statement that described the deal as "pro-competitive and pro-consumer by connecting property managers to more high-intent renters so they can fill their vacancies and more renters can get home."
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How consumers can navigate a tough rental market
Consumers who may be worried about a lack of competition in the online rental listing marketplace can make the choice to look beyond these large websites to find properties to rent. This could potentially help said consumers to find more listings from landlords who may not be able to afford the potentially high advertising prices.
Beyond Zillow and Redfin, renters can try alternatives like local newspaper classified ads, Craigslist and Facebook Marketplace. They can also reach out to friends and use social media to see if anyone knows someone trying to rent their property, or work with a local real estate agent to expand their rental options.
By taking the time to research what a rental property should cost, and using more than just the big websites for rental listings, renters can hopefully find a property that is a good fit for their needs and charges a fair price.
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USA Today (1)
This article originally appeared on Moneywise.com under the title: Zillow and Redfin being sued by 5 states, the FTC over alleged rental advertising scheme — how it could impact prices
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