The real estate battle continues.
Compass has filed a sweeping federal antitrust lawsuit against Zillow, accusing the online listing platform of using its market dominance to crush competition and stifle innovation.
Acknowledging how most buyers begin their search on Zillow, Compass said Zillow is protecting its market dominance with its Listing Access Standards—which are scheduled for enforcement on June 30.
The new listing standards will essentially boycott properties previously marketed on internal brokerage or MLS platforms.
Compass has hired Ken Dintzer, with Crowell & Moring, one of the lawyers who while at the Department of Justice, successfully sued Google for monopolizing and stifling competition in the online search services.
“This lawsuit is about protecting consumer choice,” said Compass Founder & CEO Robert Reffkin in a statement shared with RISMedia. “No one company should have the power to ban agents or listings simply because they don’t follow that company’s business model.”
In a statement shared with RISMedia, a Zillow spokesperson said the lawsuit was based on “unfounded” claims and promised to “vigorously defend against them.”
“Our listing access standards are designed to ensure transparency, equal opportunity, and broad visibility for everyone so sellers can maximize price and time to sell and so buyers have access to all available inventory,” the spokesperson said. “Our focus remains on creating a level playing field that serves the best interests of everyone in the home buying and selling journey.”
In the lawsuit, referring to the ban as “draconian,” Compass explains how an agent, after violating the rule three times, will be blacklisted from Zillow, as will any non-compliant listing posted by that agent going forward.
“Simply stated, the Zillow ban mandates that if a homeseller and her agent market a home off Zillow for more than one day, then Zillow and its allies will ban that listing from their search platforms, making the home invisible for many buyers,” the court document reads. “The Zillow ban seeks to ensure that all home listings in this country are steered on to its dominant search platform so Zillow can monetize each home listing and protect its monopoly.”
In the 60-page complaint filed early Monday morning, Compass said implementing the anticompetitive rule “was not enough” to suppress Compass, and accuses Redfin and eXp Realty of conspiring with Zillow.
According to the lawsuit, not even an hour after the Zillow-eXp announcement, Reffkin received a text message from Redfin CEO Glenn Kelman, requesting a call within the next hour. During the 45-minute call, Kelman “revealed information suggesting that Redfin and Zillow had conspired,” according to the document.
According to the filing, during the call, Kelman told Reffkin that it is “not good when Zillow and Compass are warring” and suggested that Zillow or Redfin would reward Compass with pre-marketing options. He also suggested that Zillow would “make it up to Compass,” financially, according to the filing, if Compass were to change or slow its pre-marketing strategies.
The day after the call from Kelman, Zillow suggested the same idea to Compass executives, which, according to the Compass lawsuit “demonstrates the pre-existing conspiracy between Zillow and co-conspirator Redfin.”
The court filing then accuses eXp of conspiring, given that it also joined Zillow in the ban, in the same hour that Zillow announced it, even offering a joint press release on their new agreement and partnership.
In a sharply-worded statement shared with RISMedia, eXp CEO Leo Pareja said it was “ironic” that Compass chose to “burn cash and credibility on a lawsuit” as “a company that’s never turned a profit.”
“The recent legal filing contains claims that are without merit as they relate to eXp. eXp is not a named defendant, and any implication of co-conspiracy is categorically false,” Pareja wrote. “Our business strategies were developed independently in response to a rapidly evolving real estate market.”
Reffkin was “shocked” as he anticipated Redfin taking the opposite position from Zillow, pointing out that another portal rival, Homes.com, has come out strongly against the Zillow standards.
“The Zillow ban presented Redfin the opportunity to say that it had more listings than Zillow on its platform. And that is what would be in co-conspirator Redfin’s economic self-interest, absent the conspiracy,” read the filing. “This is precisely why Homes.com, an online listing platform trying to compete with Zillow, has refused to join the conspiracy, instead criticizing the Zillow ban and offering free ‘listing boosts’ to those home sellers and agents whose listings are banned by Zillow.”
Redfin did not immediately respond to a request for comment. eXp did not respond to a request for comment.
The document also mentions other competitors, like Brown Harris Stevens, which announced its support of Zillow and posted a photo on Instagram of a Compass billboard with the phrase “NOPE, Love, Zillow.”
More broadly, Compass alleges the industry has come together to push back against its “innovative” marketing strategies, claiming that Clear Cooperation as a policy “targeted” Compass specifically, and claiming “the industry” initially referred to Clear Cooperation as “the Compass Rule.”
The filing also outlined a meeting with Compass and Zillow on April 1, in which Zillow CEO Jeremy Wacksman and CFO Jeremy Hofmann warned Compass multiple times that Zillow “will not allow Compass to have listings that are not on Zillow.”
Reffkin also allegedly brought up MRED, the Illinois-based MLS that uses an internal private listing network, with Hofmann allegedly saying “we will no longer allow that to happen.”
Compass did not answer questions on the record regarding these allegations, what Hofmann means or what evidence the company has of these communications.
Zillow also did not respond to specific questions about the company’s communications with other industry stakeholders, the April 1 meeting with Reffkin or other allegations in the lawsuit, including opposition to MRED’s listing platform and an allegation by Compass that Zillow admitted the “Zestimate” is not accurate.
Pointing to Douglas Elliman, Corcoran and Sotheby’s, Reffkin told the Zillow executives that other brokerages have their own internal listings systems, according to the filing.
Hoffman then said that Zillow was “making the bet” that they could force home sellers to fall in line when they are “forced to choose” between using Zillow or pre-marketing strategies like those at Compass.
The meeting ended with Wacksman suggesting weekly follow-up meetings between the two companies to “strike a deal.” Compass refused the “payoff not to compete.”
Besides the ban, Compass alleges this anticompetitive behavior layers over the incremental tax Zillow already places on real estate transactions by redirecting buyers away from its listing agent to a Zillow-affiliated buyer, collecting 40% of the incremental buyer agent commission, according to the court document.
“They put a toll booth on a road that otherwise worked fine, adding friction and cost to the process because the money goes to them,” the filing reads.
Editor’s note: this story was updated at 11:43 a.m. eastern time with comments from a Zillow spokesperson.
Editor’s note: this story was updated with comments from eXp CEO Leo Pareja at 12:23 p.m. eastern time.
