Attorneys general from five different states filed a lawsuit against Zillow and Redfin, alleging that the real estate firms conspired to suppress competition in the market for online rental listings.
The action comes a day after the Federal Trade Commission filed a similar lawsuit.
In February, Zillow allegedly paid Redfin $100 million to close its rental advertising business and move customers to Zillow, according to officials from New York, Arizona, Connecticut, Washington, and Virginia.
According to the lawsuit, the agreement violated federal antitrust laws and effectively eliminated head-to-head competition, which could have increased advertising costs and reduced consumer rental options.
The agreement "may increase expenses for advertisers and give renters fewer options when looking for a new apartment," according to New York Attorney General Letitia James.
Additionally, the lawsuit claims that Redfin fired about 450 workers connected to its rental business, some of whom went on to work for Zillow.
Approximately 85 percent of rental listing revenue is generated by Zillow, Redfin, and CoStar, which dominate the market, according to James' office.
The AGs are willing to restructure the companies in order to maintain competition, and they are requesting an injunction to stop the agreement.
Both businesses deny any wrongdoing. Zillow maintained that the agreement was "pro-competitive and pro-consumer," while Redfin claimed the collaboration reduced expenses and enhanced rental search capabilities. After the lawsuits, shares of both companies fell.
In order to restore competition, the FTC's complaint also suggests possible divestitures and demands that the agreement be terminated.
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