FTC Rebrands Zillow–Redfin Partnership As A "Pay‑to‑Exit" Deal

The Federal Trade Commission (FTC) recently sued Zillow and Redfin, alleging that they agreed not to compete for internet listing services (ILS) advertising for multifamily rental properties. While the companies touted their partnership as a way to expand Zillow's network across Redfin's rental sites and reach a wider audience more efficiently, the FTC alleged the deal amounted to Zillow paying Redfin to end its multifamily rental advertising services business, leaving renters and advertisers with Zillow and CoStar as their only rental ILS options. The Commission voted unanimously to authorize the complaint, which was filed in the Eastern District of Virginia. Five state attorneys general filed a parallel action the next day. The lawsuits are a reminder of the antitrust risks companies must consider when contemplating strategic exits through partnerships with competitors.

The FTC's Allegations

As described by the FTC, Zillow and Redfin operated two of the largest rental ILS networks by traffic and revenue, serving property managers seeking advertising reach and renters searching for available units. The complaint focuses on competition for advertising for rental buildings with 25 or more units and alleges harm across broader rental ILS advertising as well.

The agency alleges that, in February 2025, Zillow paid Redfin approximately $100 million in connection with two agreements that called for Redfin to terminate its multifamily rental advertising business for up to nine years, transition its existing advertising customers to Zillow, and exclusively syndicate Zillow's multifamily listings on Redfin's sites, such that Redfin's rental pages displayed Zillow's inventory. The FTC also alleges that Redfin laid off hundreds of rental advertising employees and shared competitively sensitive information with Zillow while facilitating Zillow's selective hiring of some of these former Redfin personnel.

From "Partnership" to Sherman and Clayton Claims

The FTC challenges the agreements as both a horizontal restraint and a de facto acquisition. First, it characterizes the arrangements as an agreement between competitors to stop competing in multifamily rental advertising, violating Section 1 of the Sherman Act. Second, it alleges the arrangements amount to an acquisition that may substantially lessen competition by removing a competitor from a concentrated market, violating Section 7 of the Clayton Act. The complaint also claims the agreements are an unfair method of competition, violating Section 5 of the FTC Act.

In addressing harm to competition, the FTC alleges the agreements removed a "vibrant" independent competitor in an already concentrated space, reduced property managers' options, dulled incentives to invest and innovate to attract renters, and likely increased advertising prices or otherwise worsened terms. The agency seeks to unwind the arrangements and asks for structural remedies such as divestitures or business reconstruction to restore the lost competition.

Why This Case Resonates Beyond Rentals

This is a notable early conduct case in the current US enforcement environment and reflects several themes that should resonate in industries beyond rental listings.

• First, strategic exit arrangements with competitors can draw scrutiny under Section 1 of the Sherman Act even when formed as "partnerships," if they remove an actual or nascent rival and/or suppress head-to-head competition in a concentrated market.
• Second, the FTC may investigate partnerships among competitors as acquisitions that may violate Section 7 of the Clayton Act, where the partnership diminishes the competitive intensity of one of the partners. In this matter, the FTC's focus on transitions of customers, data, and talent contributed to its treatment of a contractual collaboration as being the functional equivalent of an acquisition.
• Third, the matter illustrates continuing attention to platform markets where network effects, content aggregation, and two-sided dynamics can potentially raise barriers to entry and amplify potential harm to competition from the loss of a rival. The FTC highlights not only potential price and term effects for advertisers but also alleged reductions in incentives to invest in user experience and traffic acquisition for renters.
• Finally, the remedies the FTC seeks go beyond unwinding a single agreement. By explicitly contemplating structural relief and periodic compliance reporting, the agency signals an appetite to restore competition through divestitures or affirmative actions that lead to business reconstruction. This may be particularly onerous for companies that had a good faith basis for exiting a business, but may be forced to continue business activities and/or sell business assets to an entity that is not their preferred buyer.

Practical Takeaways

Businesses considering partnerships with competitors should evaluate whether the structure, duration, and practical effects could be viewed as suppressing competition, rather than simply enabling improved capabilities and efficiencies. Areas of caution may include exclusivity, exits from overlapping lines of business, coordinated customer transition mechanisms, large payments in exchange for competitive standstill commitments, transfers of competitively sensitive information, and/or transfers of key personnel that diminish the competitive independence of the parties to the partnership.

This case also serves as a reminder that nonreportable or contractual collaborations are not insulated from merger-like scrutiny when the facts could amount to a combination of competitive assets or the elimination of a rival outside the Hart-Scott-Rodino framework. Especially where counterparties occupy leading positions in concentrated markets, agencies may press for structural relief to restore competition even in the absence of a notifiable transaction.

What's Next

The E.D. Virginia district court will assess the agreements' competitive effects, the plausibility of claimed efficiencies, and whether less restrictive means could have achieved the parties' asserted procompetitive benefits without extinguishing head-to-head rivalry.

On October 6, Judge Anthony J. Trenga of the U.S. District Court for the Eastern District of Virginia granted the FTC's motion to stay proceedings due to the government shutdown.

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