The $100M Deal to Stop Competing

Introduction

Check Zillow against Redfin before you sign a lease, and here's what the comparison hides: for any building with 25 or more units, Redfin's rental sites are contractually required to show only Zillow's listings, for as long as ten years. The two companies wrote it into a contract in February 2025, the same one where Zillow paid Redfin $100 million to leave the rental-advertising business. Five days after signing, they announced it to the public as a partnership "to make apartment hunting easier and give listings more exposure." The FTC read the contract instead of the press release, sued, and a federal judge has since looked at the same document and called the conduct "clearly anti-competitive" on its face.

The word doing the heavy lifting there is "partnership." Take it off, and what the FTC describes is plain: Zillow's most direct competitor in rental advertising agreed to stop competing for a payment. No shared pricing software, no algorithm quietly setting rents. This is an older, simpler antitrust problem: two rivals carving up a market so one stops showing up to fight for it. It's also genuinely contested. The same judge who called the conduct anti-competitive on its face handed Zillow and Redfin a real win last week, a distinction most of the coverage has blurred.

The Number Two That Agreed to Quit

Redfin only entered rental listings in 2021, when it bought RentPath and, with it, two sites renters know well: Rent.com and ApartmentGuide.com. On February 6, 2025, per the FTC's complaint, it signed that business away in two documents. The Partnership Agreement had Zillow pay $100 million up front, plus a guaranteed $75 million minimum in per-lead fees the first year, for Redfin moving its multifamily advertisers to Zillow and shutting the rest down. Redfin agreed to cancel each advertiser's contract within 30 days of it signing with Zillow, fire the hundreds of employees who ran the operation, help Zillow hire whichever it wanted, and hand over its "competitively sensitive" customer data. The Content License Agreement is the mirror: Redfin's network shows only Zillow's listings for buildings of 25-plus units for up to ten years, with a nine-year non-compete.

Rental listings are dominated by three platforms: Zillow, Redfin, and CoStar's Apartments.com, the largest of the three. That's what makes this a case of a dominant platform paying to absorb a rival, not a lone monopoly acting on its own. Zillow had already told the market in May 2024 that it carried "more than 50% of all rental listings, more than any other site." The complaint says the deal pushes an already highly concentrated market meaningfully higher, and that the companies never filed it for the standard pre-merger review under the Hart-Scott-Rodino Act, skipping the screen built to catch exactly this.

What makes the exit strange is that Redfin had been trying to grow this business, not leave it. On a 2024 earnings call quoted in the five states' complaint, CEO Glenn Kelman bragged that Redfin's rentals unit had gone "from losing $10 million" a year earlier to profitable, and that the plan was "to try to grab share, hand over fist." Months later, it took a check to disappear instead. A month after signing rentals away, Redfin agreed to be acquired by Rocket Companies in an all-stock deal worth $1.75 billion.

Two Rulings, and Who Won Each

The FTC isn't after a fine. Its complaint asks for structural relief, divestiture or "reconstruction" of the businesses, leaning on a blunt line from Bureau of Competition director Daniel Guarnera in the agency's announcement: "Paying off a competitor to stop competing against you is a violation of federal antitrust laws." Five state AGs (Arizona, Connecticut, New York, Virginia, Washington) joined, seeking the same injunctive relief, no damages. The fight is over whether a court forces the deal back apart, not who writes a check.

On May 6, 2026, Judge Anthony Trenga refused to throw the case out. His four-page order describes "what appears from the face of the Complaint to be clearly anti-competitive conduct" and applies the "quick look" standard reserved for arrangements where "an observer with even a rudimentary understanding of economics could conclude" there's an anticompetitive effect. He rejected the companies' bid for the more forgiving "rule of reason" review and denied the motion. A real loss for Zillow and Redfin, but a low bar: surviving a motion to dismiss means the claims are plausible enough to go forward, not that anyone has been found liable.

Then, on July 8, the same judge handed the companies a win. The FTC had asked him to declare the deal anticompetitive before trial, on partial summary judgment, and he declined, sending the dispute to trial rather than resolving it early. MLex put it flatly: "Zillow, Redfin beat US FTC bid." The Real Deal described the judge denying the government's request to decide the case early. Other coverage keeps muddling this: July 8 was the FTC losing its own motion, not a second defeat for Zillow and Redfin. The case now goes to a bench trial, judge alone, no jury, beginning August 24, 2026, per the court's docket.

A second lawsuit runs on a separate track: in June 2026, Zillow shareholder Matt Breidert filed a securities-fraud complaint accusing the company, CEO Jeremy Wacksman, and CFO Jeremy Hofmann of misleading investors by selling the Redfin deal as a "partnership" while hiding the antitrust exposure underneath. The stock drops are what the suit is built on. After Zillow flagged rising legal costs on its February 2026 earnings call, its Class C shares fell 17.12% the next day, after Hofmann warned analysts to expect legal-expense increases worth "approximately 200 basis points" of EBITDA margin headwind in the first quarter.

Who Benefits

Zillow is the obvious winner, and its own filings say so out loud. Rentals became the company's fastest-growing line: revenue up 45% year over year in Q4 2025, with the multifamily piece the deal covers up 63%, per Zillow's earnings release. Full-year rentals revenue rose 39% to $630 million. The mechanism is direct: remove the number-two competitor, convert its traffic into a second storefront for your own inventory, and the segment climbs without having to win it in the open. Zillow also spent $670 million on stock buybacks in 2025 as legal bills grew.

The part that complicates the easy "executives cashed out" version is that mostly they didn't, at least on paper. Wacksman's total pay fell 54.43% in 2025, from $15.66 million to $7.14 million, and nearly 88% of it was stock and options, according to Zillow's 2026 proxy. As the share price cratered on antitrust news, in other words, the CEO closest to the deal watched his own paper wealth fall with it. Hofmann and COO Jun Choo each saw pay rise about 29% in the year the stock lost more than half its value.

Redfin and its new owner got the cleanest thing of all: cash. The upfront cash and the guaranteed lead fees let Redfin shed a money-losing operation and walk into the Rocket deal leaner, with years of Zillow payments locked in. Redfin's own stated reason wasn't consumer benefit: "the existing number of Redfin advertising customers couldn't justify the cost of maintaining our rentals sales force."

The Tell Is in Zillow's Own Proxy

Here's the detail I keep coming back to. Zillow's 2026 proxy, the document that exists to justify executive pay, credits the Redfin deal by name for the "company performance milestones" behind it, citing the rentals growth as proof. In the same filing, submitted more than six months after the FTC sued to break up that very business, the word "antitrust" never appears once.

That gap is the argument in miniature: "partnership" did PR work in public and legal work in the filings. The space between word and contract is what a plain "FTC sues Zillow" headline can't show. On the search side, where renters actually live, the contract let one company quietly stand in for two.

Parts of the other side are real. Renters on either site may genuinely see more listings in the short run (the companies' central defense), and Redfin's cost-cutting story holds up, since its rentals unit really was bleeding money. And July 8 shows a judge who isn't rubber-stamping the government either. The enforcement here is working as designed: a unanimous FTC vote backed by five states, in front of a judge who has plainly read the contract. What no document shows yet is a dollar figure for higher rent. The harm the FTC warns about, worse terms for advertisers passed to tenants, is a plausible next step, not a measured fact.

The Bottom Line

Strip the branding and the record shows two competitors who agreed, in writing, that one would pay the other to stop competing, then told the public it was teamwork. Whether that crosses the legal line is what the August trial decides.

The harder problem sits underneath the verdict. The FTC wants to put competition back, by force if it has to. The competitor it would be restoring has already been taken apart. Redfin's rentals sales force was fired more than a year ago, and its customer data now lives inside Zillow. Redfin itself is gone too, folded into Rocket Companies in a $1.75 billion deal that closed back in July 2025. Zillow keeps booking the revenue, and the mirror agreement keeps running, but the rival it was supposed to be competing against isn't there anymore. If the government wins in August, what is actually left to un-merge?