Free-market competition is, and always has been, the great driver of optimal outcomes for consumers. Judge Robert Bork argued for a consumer welfare standard to examine business behavior in his book “The Antitrust Paradox.” Bork argues that antitrust regulators should focus on the impact that corporate behavior is having on consumers rather than protecting obsolete business models.
Recently, Rep. Ben Cline urged the Federal Trade Commission to investigate online real estate platforms for alleged misconduct that harms homebuyers. His letter outlines the kind of action that consumers and conservatives should rally around.
Cline asks regulators to consider two areas of concern in the online real estate market: First, deceptive referral tools that direct buyers to affiliated agents, and, second, financing options that steer buyers toward lenders that pay the platforms a kickback. I agree with Cline that we should be wary of companies becoming so dominant that consumer welfare is harmed.
Without naming names, Cline’s letter draws attention to Zillow, the largest online real estate broker. The platform’s “contact agent” feature, the letter notes, connects users with agents who pay Zillow, rather than the selling agent, for priority status. This online feature increases commission fees for buyers.
Likewise, the site allegedly encourages agents to push buyers to its mortgage lending division, in return for a steady stream of leads. Zillow does not charge agents for the leads but does take a cut of commissions that result from them—as much as 40 percent, according to another lawsuit filed against the real estate leader late last year.
At best, such practices obscure users’ visibility into the homebuying process. At worst, they extract even more money out of them, driving up the costs of owning a home—which is fast becoming an elusive dream for many, especially young people. Sixty percent of Gen Zers worry they will never own a home, according to one study, and nearly half say hidden fees are a prohibiting factor.
Homeownership is one of the greatest tools to build wealth. In 2022, a family that bought a median-value home 10 years earlier accumulated $225,000 of equity value, if they sold at the then-median home price, sheerly through appreciation. A Harvard study the same year found that the median homeowner’s wealth was 40 times greater than the median renter’s.
While some of that discrepancy owes to correlation, not causation, there’s no denying that homeownership is a cornerstone of wealth building. Not to mention, owning a home provides families with security and peace of mind—a place to raise their children, build community and put down roots.
Research even shows that homeowners are more likely to vote in local elections, and, not entirely surprising, they are more likely to support free-market principles. It’s no wonder so many young people have bought into the lie of socialism—in a survey last year, more than three in five Americans between the ages of 18 and 29 said they hold a “favorable view” of socialism—it’s an appealing facade for those who feel fenced out of the American dream.
Sadly, this isn’t the first time that online real estate agents have earned regulators’ scrutiny. Just last year, President Donald Trump’s FTC sued Zillow and Redfin for allegedly conspiring to eliminate competition in rental listings. The lawsuit claims Zillow paid Redfin $100 million to stop advertising multifamily properties and run only syndicated Zillow listings.
“Paying off a competitor to stop competing against you is a violation of federal antitrust laws,” explained the director of the FTC’s Bureau of Competition.
If proven true, Zillow’s and other platforms’ actions to prioritize their preferred agents and channel buyers into their in-house financing is just as egregious. Buyers may think they are getting the best mortgage rates when they are not. They might pay a higher commission fee by involving a buyer’s agent, when they could have contacted the selling agent directly.
Cline—who joined his fellow lawmakers from Virginia in asking the FTC to investigate—isn’t asking for the agency to pick winners and losers. He is asking regulators to look at the evidence and, if appropriate, close the loopholes that allow online real estate platforms to exploit consumer vulnerabilities.
Consumer welfare is predicated, in part, on transparency. When a potential homebuyer uses an online platform, they deserve to know who is getting paid, why they are being routed the way they are, and whether they have real alternatives. If you don’t have an open market, you can’t have a free market. I trust that the FTC will seriously investigate the accusations to ensure the gatekeepers to homeownership are not blocking it.
