FTC Sues Zillow, Redfin: Antitrust Rental Case
- The Federal Trade Commission (FTC) filed a lawsuit against real estate companies Zillow Group and Redfin on August 3, 2023, alleging they conspired to maintain artificially high fees...
- The lawsuit focuses on the National Association of Realtors' (NAR) Multiple Listing Service (MLS), a database used by real estate agents to list properties for sale.
- Traditionally, the total commission on a home sale is around 5-6%, split between the seller's and buyer's agents.
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FTC Sues Zillow and redfin, Alleging conspiracy to Inflate Real Estate Fees
The Federal Trade Commission (FTC) filed a lawsuit against real estate companies Zillow Group and Redfin on August 3, 2023, alleging they conspired to maintain artificially high fees charged to home sellers. The complaint centers around the Multiple Listing Service (MLS) and how these companies allegedly manipulated its rules to protect their commission revenue.FTC Press Release, August 3, 2023
The Core of the Allegation: MLS and Commission Structures
The lawsuit focuses on the National Association of Realtors’ (NAR) Multiple Listing Service (MLS), a database used by real estate agents to list properties for sale. The FTC argues that Zillow and Redfin actively participated in rules that require sellers to offer a commission to the buyer’s agent,even if the seller hasn’t directly engaged that agent. Department of Justice Antitrust Case Against NAR This practice, known as “cooperative compensation,” is alleged to have artificially inflated commission rates, costing home sellers billions of dollars annually.
Traditionally, the total commission on a home sale is around 5-6%, split between the seller’s and buyer’s agents. The FTC contends that the mandatory offer to the buyer’s agent removes price competition and discourages negotiation, leading to higher overall costs. The complaint specifically alleges that Zillow and Redfin knew about these anti-competitive effects but actively worked to maintain the status quo.
Zillow and Redfin’s Alleged Roles
The FTC’s complaint details how Zillow and Redfin allegedly benefited from the existing commission structure. Zillow, through its Premier Agent program, receives revenue based on leads generated from listings in the MLS. The FTC argues that Zillow had an incentive to protect the high commission rates because its revenue is tied to the overall volume of home sales. FTC Complaint
Redfin, while also benefiting from the MLS system, has a different business model that includes offering lower commission rates to sellers. However, the FTC alleges that Redfin actively participated in maintaining the rules that prevented more widespread adoption of lower-fee options. The complaint suggests Redfin feared that disrupting the existing system would harm its own competitive position.
Key Allegations Against Zillow
- Zillow allegedly incentivized agents to maintain high commission rates.
- Zillow’s Premier Agent program is described as reliant on the inflated commission structure.
- Zillow allegedly possessed data demonstrating the anti-competitive effects of the MLS rules.