NEW YORK CITY—As day two of four in the Compass-Zillow preliminary injunction hearing got underway on Nov. 19, Errol Samuelson, Zillow’s chief industry development officer, finished up on the stand, with Zillow CEO Jeremy Wacksman next to raise his right hand. The hearing took place in courtroom 14C at the Daniel Patrick Moynihan U.S. Courthouse in downtown Manhattan with Judge Jeannette Vargas presiding.
The trial—officially an “evidentiary hearing”—is not to decide the merits of the case. Rather, it is for Vargas to decide whether she will block Zillow’s rules from going into effect while the rest of the lawsuit plays out, with Compass claiming it (as well as agents and consumers) will be “irreparably harmed” if the rules are allowed to remain in place.
Compass sued Zillow back in June, alleging a joint boycott and abuse of “monopoly power” in violation of federal antitrust law, focused on the company’ rules which restrict certain types of listings from appearing on its site if they were previously marketed on private networks or platforms without being shared broadly (and with Zillow).
While Zillow attorney Bonnie Lau interrogated Compass CEO Robert Reffkin during Tuesday’s afternoon session, on Wednesday, Compass attorney Kenneth Dintzer probed Zillow’s top executives during a long and seemingly disjointed line of questioning. Wacksman also addressed his communications with Redfin CEO Glenn Kelman, as Compass has alleged the two portals conspired to formulate rules that would harm Compass.
But also, Zillow CFO Jeremy Hofmann acknowledged that before launching its new rules, the portal floated a “revenue uplift” to Compass of over $1.3 billion if the brokerage would comply with the standards and change or eliminate its private listing strategy. Zillow also discussed the “potential” for Compass to double-end more transactions if it agreed.
“We didn’t move very far on anything because after one meeting, it wasn’t interesting enough for them,” Hofmann said.
Hofmann also acknowledged that the company did not do any calculations regarding whether the new standards would lose the company revenue, but it “didn’t expect” it would. A source familiar with Compass’s thinking previously told RISMedia that showing Zillow lost revenue in the short term to harm a competitor could fit into Compass’s argument that Zillow is a monopoly, even if Zillow argues its policies are only applicable to its own platform.
A large part of the early testimony focused on the minutiae of Zillow’s new rules. Samuelson also explicitly denied any agreement with “any other industry participant” to boycott Compass, or asking them to enact similar rules.
“We truly believe that sellers and buyers benefit when there’s the broadest distribution of listings, including on our competitors’ websites,” Samuelson said.
But Dinzter honed in on the fact that Zillow does not apply these standards to home builders and FSBOs, and the fact that Zillow’s business model is built on advertising. Samuelson also later testified in a session that was closed to the public.
Dintzer also showed data that Zillow issued violations to 700 listings represented by Compass agents, compared to 17 for Howard Hanna Real Estate Services, the brokerage with the second-most violations, seemingly as evidence that Zillow is specifically using the policy to pressure Compass, even as other brokerages run private networks.
A Zillow spokesperson pushed back on this to RISMedia, pointing to what the company has called “misleading” communications from Compass executives to agents, with Reffkin and others saying the Zillow rules would not impact Compass in messages over the last several month, even as Zillow told the brokerage that it “takes issues” with Compass Private Exclusives from the beginning.
“Compass actively pushes the private listing network to its agents despite knowing (its three-phase marketing plan) violates our listing standards. They’ve misled their own agents repeatedly and for months. By contrast, when fully informed about the disadvantages of private listing networks, most agents and sellers choose maximum exposure,” the Zillow spokesperson said.
Wacksman on the stand
After Reffkin testified on the first day, Wacksman spent significant time addressing his company’s plans and implementation of the rules, as well as communications with Redfin CEO Glenn Kelman.
Dintzer presented an extensive series of slides depicting comments and responses Wacksman provided during a prior deposition. He also displayed Zillow emails in which the terms “carrots” and “sticks” were used to show how the company rewarded brokerages in favor of its Listing Access Standards and penalized those not in favor. Those accepting of the new standards received carrots, while those not on board received sticks, largely meaning warning letters about non-compliance with the new rules. What carrots represented was never explained, although in previous court proceedings, documents showed Zillow had considered offering its products and “more direct payment for content.”
Dintzer also questioned Zillow’s $100 million rental agreement with Redfin, along with Wacksman’s relationship with Kelman, establishing a timeline of when the two now “partners and competitors” communicated, with multiple texts shown on the screen in court. Wacksman was asked to confirm whether or not they discussed various topics, such as NAR’s Clear Cooperation Policy, the Listing Access Standards, etc. One exchange of texts shown focused on a date when Wacksman was vacationing in England.
“I work even when I’m on vacation,” he said. “I’m just in a different location.”
After Zillow released more detailed information about the new rules, Wacksman acknowledged receiving a call from Kelman asking to clarify whether rules required listing be submitted to the MLS, rather than just directly to Zillow. Zillow updated its FAQ the next day to make this clarification.
Even though one internal Zillow missive mentioned “isolating Compass and other bad actors,” Wacksman appeared calm and confident throughout his time on the stand. When Dintzer at one point called him Mr. Redfin, even the judge cracked a smile.
It was eventually established with no disagreement that Zillow’s rules can vary based on the rules of different MLSs across the country, though its goal is national in scope.
A Zillow attorney followed Dintzner with a line of questioning that allowed Wacksman to talk about his career, Zillow goals and more. Wacksman was asked by his own attorney whether Zillow believes that “exclusive listings” are “a viable strategy” for Zillow.
“Trying to build a strategy around exclusive content and losing access to other content, it doesn’t create the trust that consumers need to use you as a shopping site,” he said.
Earlier in the day, Zillow’s Samuelson finished testifying, questioned by Zillow’s Lau. He gave a brief history of the portal giant before explaining why the Listing Access Standards are a must in order for the company to continue growing.
“Buyers want to see listings immediately,” he said, referring to how private listings hurt the company. “They want to see all the options. If they don’t see them all on Zillow they could lose trust and go to another platform. It’s critical for us to be able to provide accurate information.”
Samuelson explained to the court that if someone sees a private listing they very well could be compelled to go with the brokerage that has it, with that company getting a double-ending, meaning both the buyer and seller commission.
“That can lead to agents from a small brokerage leaving to join a bigger one so they can have access to more private listings,” he said.
Samuelson also disputed Compass’s injunction attempt, stating that “they want it both ways. If they can sell a private listing, fine. But if not, then they want it on the MLS. That’s unfair for Zillow, which has invested so much in building the company.” Samuelson added that Zillow should not have to put listings that have not sold on their website without price reductions, days on market, etc. “If we have to show ones that are stale, it again undermines user trust.”
Hofmann was asked about messages he sent to Wacksman back in April saying Zillow wants to “stomp out” private listing networks and create a “chilling effect” for other brokerages who were considering launching or expanding their platforms. Hofmann claimed he was referring to “anti-consumer” private listing platforms, but acknowledged this was Zillow’s goal.
Asked if the company “accomplished that goal,” Hofmann said yes.
“I think we’ve been successful to date. I think it’s still an open debate,” he said.
