NERA's Role in Zillow’s Acquisition of Trulia

The Situation

In July 2014, Zillow, Inc. announced an agreement to purchase Trulia, Inc. in a deal that would combine the two most visited web portals for home buying. The deal was subject to a review of potential antitrust concerns by the US Federal Trade Commission (FTC).

NERA's Role

Before the merger was announced, NERA President Lawrence Wu and NERA Senior Vice President Graeme Hunter were retained by counsel for Zillow to conduct empirical analyses of the degree of competition between Zillow and Trulia and to assess the likelihood of anticompetitive pricing and innovation effects resulting from the merger. NERA experts analyzed customer information from both parties to demonstrate the low degree of switching between the two firms. NERA also performed an econometric analysis of the merging firms’ pricing data to demonstrate that the proposed transaction would not lead to a reduction in price competition.

The Result

On 13 February 2015, the FTC publicly announced that it had closed the investigation stating that the Commission “decided unanimously to close its investigation of Zillow, Inc.’s (“Zillow”) proposed acquisition of Trulia, Inc. (“Trulia”) following a comprehensive six-month investigation of the proposed transaction. Commissioners Maureen Olhausen, Joshua Wright, and Terrell McSweeney issued a statement, noting that while documentary evidence suggested that Zillow and Trulia were close competitors, the evidence supported the conclusion that online real estate portals was not a relevant market. For example, the Commissioners noted that real estate portals captured only a small portion of real estate agents’ overall spend on advertising and that there was no evidence that real estate portals offered a higher ROI compared to other forms of advertising.

In addition, the Commissioners discussed the evidence that led the Commission to conclude that the transaction would not lead to anticompetitive effects. Specifically, the Commissioners mentioned the importance of three types of evidence. First, there was evidence that a high volume of real estate agents left Zillow and Trulia on a regular basis, which suggested that the merging firms faced a high degree of competition from other sources of real estate advertising. Second, they noted that there was no evidence that the combined firm would be able to raise prices by price discriminating against “high performing” real estate agents. Third, the Commissioners based their decision on the economic evidence, which showed that few real estate agents were switching between Zillow and Trulia and that Zillow’s pricing was not lower in geographic areas where Trulia had a greater competitive presence.

NERA worked closely with counsel at Shearman & Sterling, who represented Zillow.

For a perspective from Shearman & Sterling, see