In a bombshell lawsuit this week, Realogy Holdings Corp. accused Compass of “unfair business practices and illegal schemes” to best its competitors and grow marketshare “at all costs.”
The complaint, filed in New York on Wednesday, alleges Compass “grossly” inflates pay for recruits, and has compensated for the ensuing losses with more than $1 billion from investors, as well as entices recruits to breach their non-compete contracts by divulging intel, with the assurance of legal protection should they be sued.
Additionally, Compass is accused of stealing trade secrets “directly” from Realogy computers, and the complaint details how Compass CEO and Co-Founder Robert Reffkin “personally” sought a “price-fixing” deal with Realogy, “where the two companies would agree to limit agent compensation and compete on brand”—an agreement Realogy refused.
“Open and honest competition is part and parcel of our business,” according to a Realogy statement on the suit. “We face it every day in markets all around the country. And integrity is the bedrock of our industry. But when a competitor jeopardizes that integrity with illegal and unfair actions, we take it very seriously. Our decision to fight for a level playing field is an extension of our commitment to compete vigorously—but ethically—across our brands and businesses. We are confident we will prevail.”
“At Compass we focus on providing the best possible experience for our employees, agents and their clients,” a Compass spokesperson said in a statement. “Instead of building a better future for the real estate industry, our competitors are using the court system to stifle competition, but these efforts have been unsuccessful. Compass will continue on its mission to meaningfully improve the real estate industry and help everyone find their place in the world.”
For Compass, the complaint is the latest in a string of suits. Earlier this year, Zillow Group alleged the brokerage engaged in intellectual property theft and pilfered its staff. According to media reports, that case was settled this week. No details were disclosed.
In 2018, Compass garnered $45.5 billion in sales volume, making it the third-largest Power Broker in the U.S. The brokerage has been called on its profitability strategy—a point Realogy raised in the suit—with Reffkin previously stating, “Short-term profitability is something that many of the more modern companies are not focused on.” Realogy’s brokerage division, NRT LLC, is the nation’s No. 1 Power Broker by sales volume, raking in $176 billion in 2018.
