In an entirely expected move last Friday, Oct. 16, Compass filed a federal antitrust lawsuit against California-based CRMLS, asking a judge to prevent the MLS from enforcing its “mandatory submission” policies that the brokerage argues violates antitrust policies.
As it has continued to campaign for changes to certain MLS policies, a Compass spokesperson told RISMedia more than two weeks ago the lawsuit was coming, after CRMLS defied an ultimatum and subsequently filed its own lawsuit.
The dispute centers on what Compass has characterized as unlawful restrictions on public marketing—rules that many, if not most MLSs have, requiring members to submit their listings before (or shortly after) they begin publicly marketing them elsewhere.
Compass has aggressively pursued exclusive inventory, on private internal platforms as well as on its own public website and through a partnership with Redfin. CRMLS has accused the mega-brokerage—both in court and in public—of forcing its “preferred model” of rules on the industry in order to use inventory as a “competitive weapon.”
CRMLS also previously promised to share stories about how Compass’s pursuit of private listings or exclusive inventory has allegedly harmed consumers in its region, while Compass, in the lawsuit, offered details of agents and sellers it claimed were harmed by CRMLS’s restrictions.
With a (likely) long legal battle ahead, here are the biggest takeaways from Compass’s lawsuit.
Compass targets basic MLS structure and practices
CRMLS is a public benefit corporation and a nonprofit—meaning it is legally obligated to pursue its mission or purpose.
But Compass, in its lawsuit, further defines CRMLS as “a contract, combination, or conspiracy of competing agents and brokers,” going into significant detail to argue that an MLS—made up of competitors setting rules for the whole market—should be viewed “warily” by antitrust regulators, citing a decades-old FTC report.
“CRMLS’s rules are designed and approved by the competing brokers and agents,” the lawsuit reads.
Going back to the 1940s, Compass claims that MLSs have faced over 100 antitrust investigations, resulting in 15 agreements with the Department of Justice (DOJ) regarding policies (many of those consent orders focused on commission-fixing rules and practices, rather than listing submission rules). Compass also cites the DOJ’s more recent (and seemingly dormant) investigation into the National Association of Realtors® (NAR), which described MLSs as “a joint venture of competing brokers.”
These arguments and others set a foundation reflecting something Compass has espoused publicly regarding MLSs—that they should not govern interactions or contracts between brokerages. Compass’s lawsuit notes that CRMLS is not a party to any of the exclusive right-to-sell agreements its agents sign with sellers, and also notes that homebuyers can’t “directly” access its database, while they can see and access Compass’s properties as evidence MLSs aren’t necessarily the most transparent option.
CRMLS has vigorously defended its role as a broker cooperative, arguing the restrictions are important to prevent “free-riding” and maintain an even and fair marketplace.
Compass’s lawsuit also pushes back on “pre-suit correspondence” from CRMLS that denigrated off-MLS marketing and claimed it harmed consumers, saying the MLS was “paternalistically telling homeowners and their agents what is best for them.”
“Competition requires innovation, and consumers will ultimately decide what innovations are worthwhile,” Compass wrote.
Compass isn’t talking about “private” listings
One thing that is not mentioned at all in the lawsuit is the concept or existence of a “private” listing. Compass has adamantly maintained the listings that violate CRMLS’s rules—either on Compass’s website, a partner like Redfin, or through an agent’s social media and other largely accessible channels—are public and transparent.
At the same time, the brokerage continues to keep some listings on internal private networks, which are only visible to buyers or agents that contact a Compass agent (Compass says that it will provide these listings to anyone who asks, something CRMLS claims does not happen in practice).
In the lawsuit, Compass explicitly acknowledges that what it used to call “3-Phase Marketing” is now “See It First.” There is no mention of “Compass Private Exclusives” by name, or other similar programs run by brands under Compass’s umbrella.
The lawsuit instead seeks to focus on what it calls “office exclusives,” seemingly in a much broader sense than the term is used by NAR in the 2020 Clear Cooperation Policy, which CRMLS still enforces.
That shift comes as Compass has repeatedly and strenuously emphasized that CRMLS’s (and other MLS’s rules) actually restrict listings that are “public” but not on the MLS—arguing that the real purpose of these rules is not transparency, but maintaining MLS power and blocking competing listing services.
Sociologist Elizabeth Korver-Glenn, who has extensively studied real estate practices, including private listings, previously told RISMedia that consumers understand the “wider implications” of “hidden listings,” and connect the practice to affordability issues.
The lawsuit also freely acknowledges that Compass uses its exclusive inventory to recruit agents, calling See It First “a significant reason agents affiliate with Compass.” The ability to market publicly off-MLS, the company argues, is “good for homeowners, good for agents seeking to represent homeowners, and good for Compass.”
Compass relies on disclosure and seller consent
The lawsuit also repeatedly emphasizes that all of its “phased marketing” or off-MLS listings are at the behest of the seller, and include signed disclosures in accordance with the law. It also claims that homeowner demand for phased marketing has been “substantial” across the country.
Compass also broadly paints a picture of sellers seeking to market their properties off-MLS in more “innovative” ways, and running into CRMLS’s restrictions.
The lawsuit includes four anecdotes from the last year, describing how Compass agents were allegedly fined $2,500 as their sellers asked them to market off-MLS. One involved a new mother who didn’t want the home widely marketed while caring for an infant, another owner wanted time to stage the home, and a third seller wanted to test prices for a property that was the only undamaged home on a street ravaged by wildfires.
These homeowners were forced, Compass claims, to add their property to CRMLS’s database against their wishes or interests.
“CRMLS took these actions intending to disrupt Compass’ contracts and relationships, or with knowledge that their disruption was certain or substantially certain to result,” the lawsuit says.
Compass requires written approval for marketing off-MLS, the lawsuit notes, something a handful of states have recently made a statutory requirement.
But the specific disclosures are likely to be important. In the lawsuit, Compass refers to a section of its website that describes—and promotes—the phased marketing strategy as the disclosure that homeowners sign.
That contrasts with the mandatory disclosures in states like Connecticut and Wisconsin, which lay out “potential consequences” of not marketing a property broadly.
Compass generally claims that both federal and state laws allow agents to offer alternative types of marketing, and consumers are “entitled to choose from…more than the limited options that the actions of CRMLS’s combination of competitors have forced upon the industry.”
