CoStar Group (NASDAQ: CSGP), a giant in the commercial real estate (CRE) world, recently had a major deal squashed by the Federal Trade Commission. CoStar, which owns Loopnet.com, Apartments.com, and ApartmentFinder.com to name a few, recently tried to buy RentPath, its biggest competitor in the online apartment search realm.
Landlords: Pop open the champagne. The FTC's move to file an antitrust lawsuit to block the CoStar acquisition benefits you.
Tech acquisitions out of control
The Federal Trade Commission has seemingly been asleep at the wheel for some time now regarding tech companies. This government agency has been allowing these (now) tech giants to acquire their competitors to the point of creating monopolies -- think Google (NASDAQ: GOOGL) becoming a search monopoly, Facebook (NASDAQ: FB) a social media monster (and one that's venturing to other fields -- look at some of its acquisitions), and Amazon (NASDAQ: AMZN) as ruler of the free world (kidding, sort of).
All this monopolization happened from highly aggressive acquisition business models on the part of the tech companies. But if this foiled CoStar deal is any indication, this practice is about to change, or at least we can hope it might.
The FTC steps in
Who knows what made the FTC step in this time, but step in they did. The FTC determined that RentPath, although an ailing company that filed Chapter 11 bankruptcy, is a big competitor of CoStar's, owning ApartmentGuide.com, Rent.com, and Rentals.com. If CoStar swallowed up RentPath, that move would surely have cost landlords more money to advertise their rentals.
Case in point: Landlords now need to pay Zillow (NASDAQ ZG), under Zillow Rental Manager, to list -- a change that happened after Zillow acquired Postlets, a site that was free to use.
The competition that should now remain between RentPath and CoStar will likely help keep listing prices down for landlords to list their rental properties.
What's in store for RentPath
To keep competition up and listing prices low, RentPath needs to survive. Will it? The future looks bright. Its lenders back the Chapter 11 plan and believe RentPath is on the right track moving forward despite a challenging 2020. RentPath's CEO Dhiren Fonseca, in a press release, said, "Our value proposition has never been better than it is today. Our traffic and leads have never been higher, and they continue to grow rapidly -- traffic growth in the second half of 2020 has exceeded 40% year over year for the RentPath network."
The CoStar pivot
CoStar might not have been able to acquire RentPath, but the company is still moving forward with acquisitions. Its two latest, as of December 2020, are Houses.com, a national marketplace for real estate agents and home sellers, and Homesnap, a national search portal that services multiple-listing services. These acquisitions allow CoStar, a proven player in commercial real estate, to enter residential real estate markets and compete with the likes of Zillow and Realtor.com.
The Millionacres bottom line
The move by the FTC to block the CoStar-RentPath merger is a good one for landlords. Having robust competition keeps prices low and business quality up. Landlords who advertise online, which is pretty much all landlords, can hold on to some of their advertising dollars as long as there is healthy competition in the listing-site space.