Attorney General Kris Mayes, in a bold move to protect Arizona families from soaring rental costs, has filed a lawsuit against housing listing giants Zillow and Redfin. The suit alleges that a $100 million agreement between the two companies is anticompetitive and could unfairly spike rent prices, according to a press release from the Arizona Attorney General's Office. Mayes, together with the Attorneys General of Connecticut, New York, Virginia, and Washington, is teaming up to challenge this consolidation in the Internet Listing Service (ILS) market, which has already seen Zillow absorb former competitors like HotPad and Trulia.
The lawsuit focuses on the dominance Zillow could hold over the multifamily rental listings market after paying Redfin to exit this segment and become a mere mirror for Zillow's own inventory. "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," Attorney General Mayes warned. According to Mayes, this is an explicit move on Zillow's part to to quickly scale their revenue across the marketplace, potentially squeezing out smaller players and causing an upward cascade on rental rates, according to a press release from the Arizona Attorney General's Office.
Under the terms of this controversial agreement, Redfin will not only stay out of the multifamily advertising market for up to nine years, but also hand over competitive information and introductions to Zillow sales reps, essentially bowing out of the competition. This has raised significant concern amongst these state attorneys general, as the absence of competition could not only hike listing prices but also degrade the quality of the sites, with a likelihood of higher rent and transaction fees for renters.
Connecticut Attorney General William Tong asserted the severity of the situation, telling the Arizona Attorney General's Office, "Rent is completely unaffordable right now, and this deal is going to make things worse. This unfair and anticompetitive agreement between listing giants Zillow and Redfin will jack up costs for property managers, who will pass those costs on to renters." The case contends that such a partnership violates both Section 1 of the Sherman Act and Section 7 of the Clayton Act, making it the second major antitrust action Mayes has taken to directly combat soaring rental costs after a prior lawsuit against RealPage and several landlords.
