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Welcome to The Corner. In this issue, we discuss Zillow’s aggressive strategy to expand its reach in the real estate market — and how its recent acquisition is facing heightened scrutiny from the FTC.

FTC Re-Examines Zillow’s Acquisition of ShowingTime on Antitrust Grounds

Luke Goldstein

This month, the Federal Trade Commission revived a probe into the real estate platform Zillow's $500 million acquisition of ShowingTime, one of the industry's leading online home showing services. Back in June, Zillow thought it was in the clear when the FTC closed its review period of the deal right before chair Lina Khan took over. But after the agency's summer crackdown on mergers and acquisitions as well as heightened scrutiny of Zillow from lawmakers, the FTC resurrected [[link removed]] the review, citing antitrust concerns.

The tides turned on Zillow after the Republican ranking members of the House and Senate antitrust subcommittees, Colorado Rep. Ken Buck and Utah Sen. Mike Lee, sent a letter [[link removed]] to the FTC in August urging the agency to block the deal. They argue that ShowingTime, which supported 50 million showings in 2020, will further entrench Zillow's consumer information advantage and harm competitors as well as home sellers.

It's not the first time Zillow's aggressive acquisition strategy has drawn attention from regulators. In 2014, the FTC delayed [[link removed]] the company's $2.5 billion deal to acquire Trulia, its closest competitor, but ultimately approved [[link removed]] it. The year before, Zillow had bought [[link removed]] out New York real estate platform StreetEasy. Acquisitions are part of the company's growth strategy to achieve an economy of scale.

Most people know Zillow for its real estate listings, which have become eye candy for potential homebuyers and bingeworthy escapism for renters fantasizing about homeownership. The signature feature of the platform is its price-setting algorithm that estimates the value of millions of homes across the country. But its business operations extend far beyond offering a voyeuristic tour of America's unstable housing market. Zillow is battling against a handful of other online platforms, mainly Opendoor and Redfin, in an arms race to become the Amazon of real estate e-commerce.

The company facilitates millions of home purchases by connecting buyers and sellers and also sells Zillow-owned properties directly to consumers. With nearly 200 million monthly users, the company monetizes traffic numbers to sell advertising as its main revenue source. Zillow already captures [[link removed]] a good chunk of the online real estate ad market, valued at $19.9 billion [[link removed]], according to [[link removed]]Borrell Associates, and together with Trulia draws 75 percent of online home searches. As one of the most trafficked real estate platforms, Zillow brought in $1.3 billion in revenue from online ads in 2019.

If the ad giant successfully buys ShowingTime, it would give the company a near-monopoly on another line of business: online home showing, which has become an essential service for real estate brokers in the digital age to help clients sell their properties.

"My concern about the ShowingTime deal with Zillow is that we will now have to pay our competitor for a core service," said Teresa Boardman, a broker in St. Paul, Minnesota, who filed a complaint to the FTC during the review period.

The acquisition would box most brokers into a corner with practically only one option for a home showing service. That's in part because the Multiple Listings Service (MLS), a nationwide network of local realtor associations that Boardman is a member of, used to have a home-viewing deal with BookAShow, but the company was bought [[link removed]] by its main competitor ShowingTime in 2015. Now that Zillow owns the most widely used home-viewing service, brokers signed up with MLS will effectively have to pay Zillow to use ShowingTime even though Zillow is a direct competitor to smaller brokers.

With Zillow’s control over home showing, small realtors have good reason to worry about the platform's power to deny core services. In a pending antitrust lawsuit [[link removed]], the Austin, Texas-based real estate firm REX accused the platform of engaging in anti-competitive behavior. REX alleges that by recategorizing the firm under a less visible tab on the website, Zillow wielded its platform power to cut off its access to the market.

We’ve already seen how platforms like Amazon and Google abuse their power to crush competitors. Zillow's growing control over online homebuying could devastate small realtors and pinch home sellers.

🔊 ANTI-MONOPOLY RISING:

On Thursday, the Consumer Financial Protection Bureau (CFPB) ordered [[link removed]] Google, Apple, Facebook, Amazon, Square, and PayPal to disclose information about their payment system practices by December 15, 2021. In a statement [[link removed]] about the order, CFPB Director Rohit Chopra noted several key risks about Big Tech’s foray into payments, including the potential for financial surveillance, price discrimination, and potential coercion of small businesses. (Read the Open Markets statement on the CFPB action here [[link removed]].)

Last week, Sens. Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa), with bipartisan support from 10 other senators, introduced a bill that aims to address market discrimination by vertically integrated retailers such as Amazon. The bill was derived from a similar bill that has been passed out of the Judiciary Committee in the House of Representatives. (See the Open Markets statement on the bill here [[link removed]], and the Market Screener coverage of the statement here [[link removed]].).

On Wednesday, the attorney general for the District of Columbia added Facebook chief executive officer Mark Zuckerberg to a consumer protection lawsuit filed against the company in 2018. The lawsuit, filed in the Superior Court of the District of Columbia, accused Facebook of purposefully failing to inform consumers that their data on the company’s platform would be used to sell to third-party developers, such as Cambridge Analytica. The addition of Zuckerberg to the complaint represents the first major effort to directly implicate him in the wrongdoing. ( The [[link removed]] New York Times [[link removed]])

📝 WHAT WE'VE BEEN UP TO:

Open Markets released a statement [[link removed]] urging the President’s Working Group on Financial Markets to use existing authority to address investor protection and systemic risk issues with stablecoins.

Daniel Hanley was quoted in The Washington Post [[link removed]] on Facebook whistleblower Frances Haugen’s proposed solutions for neutralizing Facebook. “Haugen’s focus is misplaced because it doesn’t target the underlying business model that critics say is the root of Facebook’s abusive conduct,” Hanley told the Post. “‘We’re still trying to put Band-Aids on a leg that’s not even there, that’s been ripped off, so to speak,’ he said."

Barry Lynn’s predictions about the dangers of centralizing manufacturing on supply-chain risks were included in a New York Times [[link removed]] opinion piece by Paul Krugman and in an American Prospect [[link removed]] article by Robert Kuttner. “Barry Lynn warned about supply-chain risks a long time ago [[link removed]],” Krugman wrote.

Barry Lynn’s proposed “Rule of Four” solution to dangerous geographic concentration of industrial capacity and risk was citied by Rana Foroohar in an opinion piece in the Financial Times [[link removed]]. In the column, Foroohar cited Lynn’s recent article “ Antimonopoly [[link removed]] Power [[link removed]]” in the July/August edition of Foreign Affairs.

The Open Markets-led coalition letter [[link removed]] to congressional leaders on crypto climate regulations was mentioned in The New York Times DealBook [[link removed]] newsletter. “This week, more than 70 nonprofits [[link removed]], including Sierra Club, the Open Markets Institute and the Action Center on Race and the Economy, urged Congress to factor crypto’s energy use into any new rules for the sector.”

Nikki Usher’s latest book, News for the Rich, was spotlighted in a New Republic [[link removed]] article about how newspapers have deserted their civic mission and skimped on local coverage. “As publications increasingly rely on subscription revenue for their income, they are available to fewer and fewer people and find themselves with audiences who are much wealthier than the mass audiences they once engaged; increasingly, Usher notes, publications are ‘prioritizing the audiences that can and will pay.’”

Zephyr Teachout cited Barry Lynn’s 2010 book, Cornered, in a NY Daily News piece about the need to ban noncompete agreements. “Lynn used Omnicon as an example of monopolies in white-collar work, noting that the extreme concentration in advertising made advertising and public relations far less innovative and dynamic, because when you went up the food chain, the hundreds of thousands of people who work in the industry were effectively working for one of just two guys.”

Nikki Usher was featured in an Illinois Newsroom [[link removed]] article about controlling misinformation on Facebook. The feature was also mentioned in Illinois Newsroom’s [[link removed]] [[link removed]] “ [[link removed]] 217 [[link removed]] Today [[link removed]].” “The biggest ways that we can get at Facebook that I see as most politically tenable really have nothing to do with speech – but more with thinking about how we break up big tech,” Usher says.

Open Markets was mentioned in a Law 360 [[link removed]] piece about Lina Khan’s recent appointment for senior advisor on rulemaking and emerging technology. [Article text not available.]

Anthony Pahnke’s op-ed in The Progressive Magazine [[link removed]] citing Open Markets’ report [[link removed]] on agricultural consolidation was republished in West Hawaii Today [[link removed]]. “It’s this system, as documented in a report from the Open Markets Institute, that allowed the four largest poultry processing firms to go from controlling 35% of the market in 1986 to 51% in 2015.”

Johnny Ryan was quoted in Vice [[link removed]] calling out Ireland for holding back European enforcement against Big Tech. “’Some 98 percent of the cross-border cases for which Ireland is responsible remain unresolved. No GDPR enforcer in any other EU member state can intervene because Ireland is the lead authority. Ireland is the bottleneck of GDPR enforcement against Google, Facebook, and big tech for all of Europe," Ryan [[link removed]] [[link removed]]said.

We appreciate your readership. Please consider making a contribution to support the continued publication of this newsletter.

DONATE [[link removed]] 📈 VITAL STAT: $69.6 billion

The fine [[link removed]] imposed on Facebook by U.K.’s Competition and Markets Authority; the corporation allegedly failed to comply with reporting requirements during a review of its proposed acquisition of Giphy.

📚 WHAT WE'RE READING:

“ From the Ashes: Imagining a Post-Commercial Future for Media [[link removed]]” (Victor Pickard, The Political Economy of Communication): Pickard analyzes how the Trump administration accelerated many of the media-related crises that produced hospitable conditions for fascistic movements. In light of this, he argues that to create a better future, fundamental reforms are needed in the media industry.

NIKKI USHER'S

NEW BOOK

News for the Rich, White, and Blue: How Place and Power Distort American Journalism

Nikki Usher, a senior fellow at Open Markets Institute’s Center for Journalism & Liberty [[link removed]], has released her third book, News for the Rich, White, and Blue: How Place and Power Distort American Journalism [[link removed]]. In her latest work, Usher offers a frank examination of the inequalities driving not just America’s journalism crisis but also certain portions of the movement to save it.

“We need to radically rethink the core functions of journalism, leverage expertise, and consider how to take the best of what the newspaper ethos of journalism can offer to places that have lost geographically specific news, “ says Usher, an associate professor at the University of Illinois-Champaign. “The news that powers democracy can be more inclusive.”

Usher is also the author of Making News at The New York Times (2014) and Interactive Journalism: Hackers, Data, and Code (2016).

News for the Rich, White, and Blue, published by Columbia University Press, is available as a hardback, paperback and e-book. You can order your copy here [[link removed]].

🔎 TIPS? COMMENTS? SUGGESTIONS?

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Written and edited by: Barry C. Lynn, Phil Longman, LaRonda Peterson, Jackie Filson, Daniel A. Hanley, Garphil Julien, Luke Goldstein, and Ezmeralda Makhamreh.

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