FTC’s Three-Pronged Zillow/Redfin Complaint Contends Semantics Don’t Erase Collusion
The details laid out in a recent complaint filed by the Federal Trade Commission (FTC) against internet listing services (ILS) Zillow and Redfin may conjure a sense of déjà vu for antitrust watchers: a nine-figure payment, a rival’s quiet retreat, and a contract that calls itself a “partnership” while disclaiming the name. Strip away the wordplay and what remains looks like an old-fashioned market allocation—the sort of pay-to-exit pact that the U.S. Supreme Court flagged in Palmer v. BRG.
But the complaint does more than reanimate a classic restraint. The commission also casts the deal as a merger in disguise and, under Section 5 of the FTC Act, an “unfair method of competition.”
According to the complaint, the long history of Zillow and Redfin’s competition in the advertising market for rental homes and apartments was brought to an end in February with Zillow’s $100 million payment to Redfin to exit the market. The deal, the FTC contends, called for Redfin “to stop selling multifamily advertising, to terminate its existing multifamily advertising contracts, and to transition those customers to Zillow.”
The contracts attached to the complaint almost tell the story themselves. One dresses up the arrangement as a “partnership,” but hastens in the fine print to say that it isn’t one (Section 9.6). Another (the “Content License Agreement”) gives Zillow the exclusive right to distribute Redfin’s rental listings. Read together, they resemble a script for market allocation: a large payment and a rival stepping aside.
Antitrust doesn’t care about labels. Whether a particular arrangement is called a partnership, syndication, or alliance, it’s the substance that matters. The deal in this case can be read three ways: as a horizontal restraint (a pay-to-exit pact under Section 1 of the Sherman Act); a merger in disguise (an acquisition that lessens competition under Section 7 of the Clayton Act); or an unfair method of competition under Section 5 of the FTC Act. Whatever the label, the outcome is the same—fewer competitors in an already-concentrated market.