Zillow and Compass are making headlines once again, potentially facing further complications due to a new letter signed by a coalition of leading consumer groups to the National Association of Attorneys General, calling for an investigation into the two company’s practices.
The letter—penned by 19 consumer groups, including the Consumer Federation of America, the American Economic Liberties Project and the Open Markets Institute—implored the National Association of Attorneys General to investigate Zillow and Compass for a multitude of reasons that have been the subject of recent lawsuits and news headlines.
That includes Zillow’s compliance with its recent settlement with the Federal Trade Commission (FTC) over allegations the company bought out its rival, Redfin. The settlement was announced the day that Zillow and Redfin were supposed to face the FTC in court over their alleged anti-competitive agreement. The letter also focuses on Compass’s well-documented push for private listings, which the consumer advocates call “information-hoarding.”
It also broadly alleges the industry is held captive by big players, who “have captured the commission structure through referral fee requirements that leave agents with no room to discount.”
“This is not a functioning market. It is a series of toll booths, each operated by an entity that has captured a chokepoint in the transaction flow,” the letter says.
Zillow’s place
The letter said that while the FTC settlement addressed the claims made in the lawsuit, it “stops short of restoring the market that existed before the (Redfin) deal,” as the “underlying issue is not resolved.”
“Zillow keeps the syndication partnership, the customer relationships and the scale the arrangement produced, while Redfin is left to rebuild competitive pressure from scratch,” the letter read. “Even with Redfin back in the listings market, Zillow has vowed to maintain its Redfin partnership, and Redfin has said the settlement allows it to maintain that partnership through at least 2030.”
Due to Zillow’s large market share of the portal space—estimated by the consumer groups as “roughly two-thirds of U.S. real estate web traffic”—the letter stated that when it or another large portal essentially “pays a rival to disappear, renters and property managers pay the price.”
Of note, the letter claimed that Zillow “effectively conceded its conduct was harmful” when it made its settlement agreement with the FTC. A spokesperson for Zillow said this is untrue and that the portal “(does) not think this conduct was harmful.”
“Our view is that not only do we not concede it’s harmful, we think it’s super good for the market to have this kind of visibility,” they continued. The spokesperson said that is why the FTC allowed the deal to remain in place, as it makes “for a more competitive market and not a less competitive one.”
“The fight we’re having over private listings on the for sale side and this FTC agreement syndication are essentially the same argument, which is we believe that in the housing market—in for sale and rentals anywhere—companies should not be gatekeeping listings or competing for who has the most listings, and that’s how you’re going to draw eyeballs to your website or to your company,” they continued.
The spokesperson added that Zillow believes that if all portals have the same listings and they’re “as visible as possible,” then that is “better for consumers, it’s better for the advertisers, and then we can all compete on providing a better service or providing better technology and helping doing those things.” Zillow also noted in a provided statement that multifamily properties on Redfin’s websites “nearly quadrupled” and multifamily properties on Zillow’s websites “grew almost 40%” since the portal put its partnership with Redfin in place.
The letter also pointed to allegedly “deceptive” practices from some portals, such as the routing of “Contact Agent” inquiries on their websites to paid members of the portal’s networks rather than to listing agents—another issue that Zillow has faced legal scrutiny over. In the same vein, the letter also referred to issues faced over alleged “mortgage kickbacks,” another allegation Zillow has faced in a lawsuit.
Those two lawsuits—known as Taylor and Armstrong—were merged, but the combined suit was dismissed back in July, with the judge writing that plaintiffs failed to show that Zillow engaged in a conspiracy with real estate teams or engaged in practices that were “likely to mislead a reasonable consumer.”
The plaintiffs are seeking to revive that suit, however, with a ruling on that effort still pending.
Zillow’s provided statement noted that the portal “exists to make getting home easier and more affordable in our country,” which is why it feels as if the letter “gets us wrong.”
“Zillow has been one of the most vocal opponents of pocket listings and private listing networks, which are the actual gatekeeping practices driving consolidation and consumer harm in today’s market,” the statement read. “If state attorneys general want to investigate listing access, inventory gatekeeping and practices that wall off consumers from the full market, that investigation should start with the brokerages funneling listings into private networks, not the platforms fighting to keep listings open.”
The consumer advocates, for their part, requested the Attorneys General “launch consumer protection investigations into dominant listing platforms.”
The Compass argument
As for Compass, the letter called out the brokerage’s Private Exclusives strategy, which has been a hot topic of conversation in the industry for many months now. Like at least some real estate leaders, the consumer groups said restricting listings can harm both buyers and sellers, and creates a lack of transparency.
Another issue brought up was how Compass allegedly “steers both sides of a transaction into dual representation, a practice that enriches the firm while leaving buyers and sellers without an unconflicted advocate.”
Notably, the letter mentioned how several states have “moved to force public listing of properties concurrent with any private marketing,”—namely Connecticut, New York and Washington—and called for further enforcement of “state laws requiring properties marketed privately to be listed concurrently on public platforms.”
The letter also pointed to Compass’s acquisition of Anywhere brands and requested that the Attorneys General review the merger “under state merger review statutes and challenge it where it reduces competition.” This is not the first time the merger has been called into question, with several Democratic lawmakers publicly questioning the merger’s approval process with the Department of Justice.
Compass declined to comment.
The letter ends with the argument that these problems are all compounded by “broader distortion” stemming from the National Association of Realtors® settlement in the landmark Burnett commission lawsuit.
Rounding out its requests for the Attorneys General, the letter asked them to “establish a multistate working group to share evidence, coordinate litigation strategy, and align enforcement across state lines so that platform operators cannot exploit jurisdictional gaps.”
The letter concluded that these affected consumers are “constituents who rely on their attorneys general to ensure that the markets they depend on are fair, competitive, and honest.”
