The Federal Trade Commission (FTC) filed a lawsuit Tuesday against real estate technology firms Zillow and Redfin, accusing them of violating federal antitrust laws through agreements that eliminated competition in the online rental advertising marketplace.

According to the complaint, Zillow paid Redfin $100 million in February under a “Partnership Agreement” that required Redfin to exit the multifamily rental advertising business, cancel existing customer contracts, and transition those customers to Zillow. At the same time, a separate “Content License Agreement” obligated Redfin to display only Zillow’s listings for properties with 25 or more units and prohibited Redfin from re-entering that segment for up to nine years.

The FTC alleges the arrangements amount to unlawful horizontal agreements between direct competitors designed to restrain trade, in violation of Section 1 of the Sherman Act. That law prohibits contracts that unreasonably limit competition. “This agreement is nothing more than an end run around competition that insulates Zillow from head-to-head competition on the merits with Redfin,” the complaint states.

The lawsuit also claims the deals function as an illegal acquisition under Section 7 of the Clayton Act, which bars acquisitions that may substantially lessen competition or create a monopoly. The FTC asserts that Zillow acquired Redfin’s customer relationships, confidential business information, and facilitated the hiring of about 450 former Redfin employees with key client ties. The complaint notes that the online rental listings industry is already highly concentrated, with Zillow, Redfin, and CoStar together accounting for more than 85 percent of national revenue.

“Paying off a competitor to stop competing against you is a violation of federal antitrust laws,” said Daniel Guarnera, Director of the FTC’s Bureau of Competition. “Zillow paid millions of dollars to eliminate Redfin as an independent competitor in an already concentrated advertising market—one that’s critical for renters, property managers, and the health of the overall U.S. housing market.”

The FTC’s case rests on two cornerstone antitrust statutes: the Sherman Act and the Clayton Act. The Sherman Act, enacted in 1890, prohibits agreements between competitors that unreasonably restrain trade, such as price-fixing or market allocation. In this case, the FTC argues that Zillow and Redfin entered into an agreement that shut down competition between them in the rental advertising market.

The Clayton Act, passed in 1914, is aimed at preventing mergers and acquisitions that could substantially reduce competition or create monopolies. Regulators use it to stop harmful market concentration before it occurs. The FTC alleges that by taking over Redfin’s customers, data, and workforce, Zillow crossed the line into a prohibited acquisition that will weaken competition in an already concentrated industry.

Both laws are designed to ensure markets remain competitive, keeping prices lower and quality higher for consumers. If successful, the FTC’s lawsuit could force Zillow and Redfin to unwind the deals and reintroduce competition into the online rental advertising space.

The agency is seeking a permanent injunction, potential divestiture, and other remedies to restore competition in the market. Neither Zillow nor Redfin has issued a public statement in response to the complaint.