NEW YORK CITY—U.S. District Judge Jeannette Vargas heard closing arguments Friday, Nov. 21, capping off a weeklong hearing between real estate giants Zillow and Compass.
At the heart of the case is Compass’s Three-Phased Marketing (3-PM) Strategy, which allows homesellers to market properties privately before listing them publicly on the Multiple Listing Service (MLS) and other platforms. Zillow in April released its Listing Access Standards, effectively banning listings that were previously marketed elsewhere before being shared more broadly.
The evidentiary hearing, which ran from Nov. 18 to Nov. 21—was not to decide the merits of the case. Rather, it was for Vargas to decide whether she will block Zillow’s rules from going into effect while the rest of the lawsuit plays out.
In this lawsuit, Compass argues that Zillow’s rules are an attempt to maintain monopoly power and alleges Zillow conspired with Redfin to eliminate this competition.
Countering, Zillow argued that its standards protect consumers by allowing them access to all listings.
Suing Zillow, Compass seeks a preliminary injunction to halt Zillow’s listing standards. Through these standards, sellers are required to list homes on Zillow within one business day of them appearing on the MLS, or they risk suspension from listing on Zillow.
Battle over market power
Vargas pressed both sides on fundamental questions about market definition and consumer harm during the days-long hearing before the Thanksgiving holiday break.
“Who are the relevant consumers here?” she asked Attorney Eric P. Tuttle, representing Zillow, questioning whether buyers, sellers or agents should be considered the relevant consumers.
Tuttle responded, saying that the relevant consumers are both buyers and sellers as it is a two-sided market.
She asked Compass’s attorney Chahira Solh the same question, to which she responded all three: homesellers, homebuyers and agents.
“I think all of these people are harmed by the Zillow Listing Access Standards,” Solh told Vargas. “From Compass’s perspective, there’s harm to competition and harm to consumers overall because they don’t have the choice of how they might want to market their properties or how they might want to go to market or buy or sell. So I think it’s both of those, plus the agents, who, then, themselves don’t have the choice of offering these different marketing strategies that could differentiate or help them land additional listings or additional buyers because they now have access to inventory that is unique.”
Zillow’s counsel emphasized that its standards aim to preserve a transparent market where consumers can access comprehensive listings on any platform, rather than being forced to check multiple brokerages to see all available homes.
“Right now, today, anyone can go on Zillow, Redfin, Realtor.com®, Homes.com, Compass.com, eXp.com, thousands of other brokerages’ websites, and there they can see the vast majority of for-sale home listings in their area,” explained Tuttle. “Compass prefers a world where it and other brokerages hold back their listings to create exclusive inventory so if shoppers want to see all the listings that Compass has, they have to go and work with Compass.”
Conspiracy claims under scrutiny
Expressing skepticism over Compass’s Section 1 conspiracy claims, Vargas noted she hadn’t “seen the evidence that convinces me that there was either an argument or that there was parallel conduct with a plus factor.”
She further added that the evidence that was presented seemed to suggest that there was no knowledge by Redfin in advance that Zillow was going to announce the standards.
Attorney Kenneth Dintzer, representing Compass, pushed back, walking through a timeline of communications between Zillow CEO Jeremy Wacksman and Redfin CEO Glenn Kelman in March and April.
“Mr. Kelman responded that he was thrilled—this is all on the same phone call—and that he said he would likely do the same. Okay. A commitment to a common scheme, likely do the same, in the phone call that he hears about it from Zillow. That is a commitment to a common scheme,” said Dintzer.
Platform power
The case touches on broader questions about platform power, beyond digital markets. Compass argued that Zillow is using its market position to dictate not just what happens on its own site, but how brokerages market properties everywhere—including yard signs and other brokerages’ websites.
“Zillow is not just dictating how homesellers market on Zillow, but it is instead dictating how homesellers market properties outside of Zillow,” said Solh.
The judge commented that Zillow is not stopping Compass from doing its 3-PM Strategy.
“Compass is still doing three-phase marketing and can continue to do three-phase marketing, and Zillow can’t tell you not to do that. They are just going to say, ‘We don’t want your product after,’” Judge Vargas said. “So you go ahead and do it. You put it on your website. You can put it on Homes.com. You can put it on Realtor.com. You’re just not putting it on Zillow.”
Solh countered, and said that the issue is that Zillow is inherently stopping Compass because “people will not adopt three-phased marketing.”
“Compass can keep pushing it and talking to clients about how it’s actually good, but we did hear testimony from several witnesses about how important Zillow was to most homesellers,” she added. “At some point, people are going to stop adopting it because they don’t want to have the risk of not ending up on Zillow.”
User experience vs. ‘Google spreadsheet’
Tuttle seized on Tuesday’s testimony from Compass’s CEO Robert Reffkin, arguing that Compass’s true intent is anti-competitive inventory hoarding rather than innovation.
“He said, in effect, that in the world Compass wants, Compass’s website wouldn’t need to be particularly good. It could just be a Google spreadsheet and, still, people would need to come and search Compass.com,” Tuttle told Vargas. “Because Compass is a big brokerage about to get even bigger, it thinks it can be a winner in the inventory competition. So users will have to come and work with Compass even if Compass provides a terrible user experience, even if it’s just a Google spreadsheet.”
Tuttle argued this admission exposed Compass’s strategy as fundamentally anticompetitive. The implication, he suggested, was that Compass wants to compete on exclusive inventory rather than user experience quality, forcing consumers to use an inferior product simply because they can control unique listings.
“When one brokerage is holding back their inventory and freeriding on the open market created by everyone and marketing that as an advantage, that puts pressure on everyone else,” Tuttle continued. “No one wants to be the sucker providing liquidity as a back-up for someone else. Other brokerages start to do the same thing.”
Looking ahead
Vargas reserved her decision following Friday’s closing arguments, with parties scheduled to submit their post-hearing papers setting out findings of fact and conclusions of law, due on Dec. 5.
There is not yet an indication as to when the Judge will rule.
