Zillow has encountered a roadblock in its effort to dismiss a class action lawsuit alleging steering in regards to the portal’s Premier agent programs and its Home Loans business.
The portal filed a motion to dismiss the suit back in June, claiming that the plaintiffs “fail” to plausibly argue their claims of state and federal antitrust law violations.
The lawsuit is known as Dupuis after the owner of the Dupuis Team in Kitsap County who filed the suit, Stephanie Dupuis. Her lawsuit claims that Zillow’s significant market share and specific policies governing its flagship lead generation programs are illegal and charge supracompetitive rates.
Judge James Robart of the Western District of Washington denied Zillow’s motion in a ruling filed yesterday, affirming that all of the plaintiffs’ arguments were plausibly supported in their complaint, and calling several of Zillow’s counter arguments “unpersuasive.”
In a statement, a Zillow spokesperson said that the portal continues to believe that “the plaintiff’s claims are fundamentally flawed.”
“Buyers on Zillow are always in control of which agent and lender they work with,” the spokesperson continued. “Zillow gives consumers and agents genuine choice, and nothing alleged in this litigation changes that.”
The suit was first filed in January in a complaint where Dupuis alleged that Zillow “abuses its monopoly” and puts pressure on agents to steer clients toward the portal’s products, violating both state and federal antitrust laws.
Dupuis claimed in the complaint that it is “impossible to do business without working with Zillow to at least some degree, because of their monopoly power,” and as such, Dupuis and her team entered into an agreement to become Preferred Agents in conjunction with the Premier Agent program. Subsequently, Dupuis and her team were charged what the complaint describes as a “hefty” cut of their commissions—40%—from leads and referrals from Zillow.
The complaint also dove into how Zillow tracks its agents performances through its Follow Up Boss (CRM) system, and alleges that an “agent’s rating in Follow Up Boss is tied to the number of loan pre-approvals they secure through ZHL (Zillow Home Loans).” The complaint alleges that an agent needs a higher rating to be granted more referrals, and an agent with a low rating is at risk of being cut from the program, thereby exerting pressure on agents to “steer” clients toward Zillow Home Loans.
In its motion to dismiss, Zillow had countered that the plaintiffs could not plausibly argue that the portal maintained or abused a monopoly, was involved in any unlawful tying of products (meaning the alleged tie between Zillow Home Loans and Follow Up Boss) or participated in unfair competition and unjust enrichment.
Robart did not agree with Zillow’s assertions in its motion, stating in his own ruling that “an antitrust plaintiff must sufficiently allege both the existence of a ‘relevant market’ and that the defendant possesses power within that market,” both of which the plaintiffs do.
He continued that the plaintiffs do “sufficiently” argue relevant market dominance, as they “identify plausible competitors and credibly assert that Zillow commands a dominant 61%-64% market share, substantiated by Zillow’s own marketing materials.”
In addition, Robart affirmed the plaintiffs tying claims, noting in his ruling that “by conditioning critical client referrals on ZHL adoption, Zillow allegedly strips agents and consumers of the ability to substitute ZHL with otherwise interchangeable independent lending products, thereby establishing a plausible tied market for the purpose of a tying claim.”
Additionally, he asserted that Dupuis “has antitrust standing to pursue a tying claim based on her allegation that she paid roughly $500 per month to maintain Follow Up Boss after Zillow made its use mandatory.” He also called the portal’s “contention” that the plaintiffs cannot establish coercion due to having freedom to leave the Zillow ecosystem as “unavailing,” due to the portal’s previously stated market dominance.
He also supported the plaintiffs proposed geographic markets in which they allege their claims are “plausible on its face,” which is the only criteria they must meet to survive a motion to dismiss.
Zillow affirmed in its statement that it will “continue to vigorously defend ourselves.”
Zillow faces similar claims in the consolidated Taylor/Armstrong lawsuit it also faces from consumers rather than agents. While previously dismissed, that suit was recently reopened with an amended complaint from the plaintiffs, however Zillow has now filed another motion to dismiss and request Judge Robart to permanently “close the doors” on that suit.
