The Federal Trade Commission (FTC) is suing real estate data firm CoStar Group over its attempted acquisition of RentPath, the parent company of Rent.com.
The administrative complaint, according to the FTC, alleges that the acquisition would increase concentration in the already highly concentrated market for internet listing services advertising for large apartment complexes in 49 U.S. metro areas, according to a statement.
“Renters have come to depend on the convenience of online search sites to find available apartments that meet their needs and budget,” Daniel Francis, deputy director of the FTC’s Bureau of Competition, said in a statement. “CoStar and RentPath operate several of the most popular sites, and their aggressive, head-to-head competition has kept advertising rates low while offering consumers a convenient, data-rich tool for finding an apartment.
“This acquisition will eliminate price and quality competition that benefits both renters and property managers.”
RentPath operates the rental sites Rent.com and ApartmentGuide.com, while CoStar’s holdings include the rental portals Apartments.com, ApartmentFinder.com and ForRent.com.
In February, CoStar announced it was purchasing RentPath for $587.5 million. The acquisition came on the heels of RentPath filing for bankruptcy, after failing to restructure $650 million in debt.
An estimated 70 percent of U.S. apartment complexes with more than 200 units and roughly 50 percent of U.S. apartment buildings with 100-199 units advertise on websites operated by either CoStar or RentPath, or both, and the FTC fears that the acquisition will increase concentration, according to the complaint.
Real estate portals effectively act as advertising portals, showing prospective clients what is available. Property managers and building owners pay fees to advertise listings and different portals create competition and keep advertising prices lower, according to the FTC.
The administrative complaint — which passed by a 4-1 vote with Commissioner Christine S. Wilson voting against — was filed Monday in federal court. An administrative complaint is an action the FTC can take by vote when it believes a law has been violated and filing an action is in the public interest.
The start of the administrative trial is scheduled for June 1, 2021. The full complaint was not publicly available at press time, but the FTC said in a release that a public version would be available soon.
Matt Blocher | Photo credit: CoStar
In a statement, Matt Blocher, CoStar Group’s vice president of marketing and communications, told Inman, “We believe the FTC is wrong in its assessment of our transaction [and] are examining our options.”
CoStar Group has gobbled up a number of real estate listing portals and data sources in 2020. The company announced last week it was acquiring Homesnap, the residential real estate search portal company, for $250 million in cash. The deal is expected to close by the end of the year.
This differs from the RentPath deal in that CoStar Group doesn’t already have a large footprint in the residential real estate for-sale listing space.
The company does, however, have a major presence in the commercial real estate sector. Earlier this year, CoStar purchased Ten-X, the company behind real estate auction platform auction.com and its accompanying commercial auction platform ten-x.com.
