PHOENIX — Arizona Attorney General Kris Mayes joined five other states in suing Zillow and Redfin over a $100 million anticompetitive agreement they believe gives Zillow an unfair dominance over the housing marketing and could push prices even higher for renters.
Mayes told KTAR News 92.3 FM on Wednesday the agreement would make Zillow “the absolute powerhouse entity” in the rental space and would be bad for consumers at a time where they’re already struggling to afford housing.
“Arizonans are already facing an astronomical cost of living — and now these massive companies want to create an unfair advantage in the market which will allow them to skyrocket costs for landlords, who will use it as an excuse to charge even more money for rent,” Mayes said in a Wednesday announcement. “We can’t just sit by and allow costs to go up and up and up.”
Mayes explained the purpose of the complaint is to try and dissolve the agreement between the two rental housing listing sites.
“Our listing syndication with Redfin benefits both renters and property managers and has expanded renters’ access to multifamily listings across multiple platforms,” a Zillow spokesperson said in a statement to KTAR News 92.3 FM. “It is 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. We remain confident in this partnership and the enhanced value it had delivered and will continue to deliver consumers.”
Why does Mayes want to stop the anticompetitive agreement between Zillow and Redfin?
According to Mayes’ office, Internet Listing Service (ILS) providers are free for renters and landlords of single-family homes and smaller multi-family buildings, but charge larger rentals a fee to post and advertise on their site.
Mayes highlighted that over the past decade Zillow and Redfin have been systematically eliminating competition by acquiring other sites, including HotPad, Trulia, Rent.com and Apartmentguide.com. The announcement added that the agreement would further consolidate the market.
It also explained that on Feb. 6, Zillow paid Redfin $100 million to exit the ILS market for multifamily properties and that Redfin now uses Zillow as its exclusive provider for rental listings with its sites mirroring Zillow’s listings.
In addition, it claimed Redfin will introduce Zillow sales representatives to its advertising customers, turn over competitively sensitive information, terminate all contracts with its multifamily customers and not compete with Zillow on multifamily rental property postings for up to nine years.
“We are suing (to try and stop the merger) under the Sherman Antitrust Act as well as the Clayton Act in the Eastern District of Virginia,” Mayes told KTAR News.
The complaint alleges the agreement violates section 1 of the Sherman Act and section 7 of the Clayton Act due to it decreasing the competition in the ILS market in both price and quality. It also argues that rental listing prices are likely to increase while quality goes down, leading to higher fees for renters.
Mayes is joined in the lawsuit by the attorneys general of California, Connecticut, New York, Virginia and Washington. The states are working in collaboration with the Federal Trade Commission.
“We have strong antitrust laws that allow us to protect our competitive, free and fair economy, and we need to enforce them,” Mayes said.
KTAR News 92.3 FM’s Balin Overstolz-McNair contributed to this report.
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