New York — Attorneys general from five states have filed a joint lawsuit against Zillow and Redfin, accusing the online real estate giants of orchestrating an illegal scheme to stifle competition in the apartment rental advertising market. The suit follows a similar complaint from the Federal Trade Commission (FTC) filed this week, escalating the legal and regulatory pressure on the companies.

The states—New York, Arizona, Connecticut, Washington, and Virginia—allege that a February 2025 agreement, in which Zillow paid Redfin $100 million to shut down its rental advertising business and transfer clients, constitutes an unlawful attempt to eliminate head-to-head competition. "This agreement is nothing more than an end run around competition," the lawsuit states, arguing it violates federal antitrust laws and could ultimately harm renters by reducing choice and potentially driving up costs.

Allegations of a Coordinated Market Consolidation

The complaint paints a picture of a coordinated effort to consolidate the market, which is already dominated by three players: Zillow, Redfin, and CoStar's Apartments.com, collectively accounting for 85% of market revenue. The suit further claims Redfin fired hundreds of employees as part of the deal, after which Zillow worked to rehire some of them—an allegation that underscores the states' view of the arrangement as a deliberate move to eliminate a competitor rather than a standard business partnership.

"Zillow’s attempt to shut down its competition could drive up costs for advertisers and leave renters with fewer options," said New York Attorney General Letitia James. The states are seeking an injunction to halt the alleged scheme and are proposing possible business restructuring to restore competition.

Companies Mount a United Defense

Both companies have issued strong rebuttals, framing their partnership as pro-competitive and pro-consumer. A Redfin spokesperson stated the deal allowed the company to cut costs and invest more in rental-search innovations, "directly benefiting apartment seekers." Zillow echoed this, saying the partnership better connects property managers with renters. They expressed confidence they would be vindicated in court.

The dual lawsuits from state and federal regulators represent a significant high-stakes legal challenge for the companies. The outcome will test the boundaries of permissible partnerships in concentrated digital marketplaces and could force a strategic pivot in how dominant platforms interact. For the online rental advertising competitive ecosystem, the cases signal heightened scrutiny over deals that regulators perceive as designed to reduce competition rather than enhance it.