Compass, the real estate brokerage that sells more houses than any of its competitors in the U.S., has sued Zillow, the country’s largest real estate site — in a legal showdown that accuses Zillow of gatekeeping home listings and of breaking federal antitrust laws.
In its suit that was filed in New York federal court Monday morning, Compass claims Zillow is engaged in an anticompetitive conspiracy to maintain a monopoly over digital home listings. Online real estate portals have become an integral part of the homebuying process, with nearly 100% of buyers now reporting that they use the internet in their home searches. And Zillow, which has a database with about 160 million properties and receives about 227 million unique visitors every month, is the undisputed giant of digital real estate sites.
The lawsuit between two industry heavyweights marks a significant escalation in an ever-raucous debate over who controls home listings.
Brokerages like Compass have sought to find ways to make their listings stand out: Since November, the company has been heavily promoting its Private Exclusives, a marketing channel of about 7,000 home listings available only to Compass agents and the buyers working with them. But in April, Zillow announced that any home that was put on the market but not available for listing on Zillow within 24 hours would be forever banned from its site.
Compass calls the action the “Zillow ban.”
“To protect its market dominance, Zillow has retaliated against competitive threats by enacting an exclusionary policy,” Compass claims in its suit.
Representatives from Zillow were not immediately available for comment on the lawsuit Monday morning. Earlier this year, Errol Samuelson, Zillow’s chief industry development officer, told The New York Times that the website was created to promote transparency in the industry and that private listings are at odds with that spirit. The turf war throughout the industry has ensnarled Redfin, another online brokerage, which has taken a posture similar to that of Zillow and is called “co-conspirator” in the lawsuit, though is not a defendant.
Zillow is following a former policy of the National Association of Realtors, which has long guided real estate rules. In 2019, NAR announced agents are required to enter any new home for sale into a public listing database, called an MLS feed, within 24 hours of advertising it.
Agents rely on multiple listing services to see which homes are on the market. When a home is put on the market, an agent enters the information into the local MLS feed, creating the digital equivalent of a “For Sale” sign in a front yard. Homes listed on the MLS can be seen by any real estate agent. Some home sellers prefer to keep their home sales private, or to market them to a smaller pool of buyers first. This initial marketing period, Compass contends in its lawsuit, provides sellers “a range of benefits,” including “a chance to test list prices, experiment with marketing approaches, and gather feedback.”
These types of sales, called “pocket listings,” “whisper listings” or “private listings,” have long been a source of contention among brokerages, because real estate listings are precious currency.
Compass’ practice, since the fall, has been to show many of its so-called private listings only to fellow Compass agents, hidden from Zillow or other search portals. Competitors have accused Compass of hoarding listings in the process.
In the meantime, NAR began facing legal challenges and mounting pressure from agents and other brokerages to reconsider the 2019 rule. In March, NAR responded by softening its policy to allow for delayed marketing, such as Compass Private Exclusives. Under the relaxed rule, individual MLS feeds can set the length of time that listings can be kept private. There are hundreds of MLS databases around the country.
But in April, Zillow announced it would stand firm. Any home that is put on the market but not available for listing on Zillow within 24 hours will be banned, a prohibition that extends to Trulia, a smaller online real estate portal acquired by Zillow in 2015.
Redfin, the online real estate brokerage and search portal that receives about 50 million unique visitors per month and ranks third in online portal traffic, rolled out a nearly identical listing ban just a few days later.
Representatives from Redfin were not immediately available for comment Monday morning.
The battle among brokerages and online sites has been yearslong. In its lawsuit, Compass describes Zillow as a direct competitor and claims NAR’s policy around privately-marketed listings was “supported by Zillow and other competitors of Compass” and “targeted at Compass’ early innovative efforts.”
Zillow uses the real estate listings on its site to sell leads to agents who pay the company a fee for access to this service.
When homes are initially marketed off Zillow, the suit contends, “Zillow cannot make money” from them. “Zillow uses the Zillow Ban to block real estate search rivals like Compass from competing head-to-head,” the suit reads.
Robert Reffkin, Compass’ founder and CEO, said his brokerage’s lawsuit was about protecting consumer choice. “No one company should have the power to ban agents or listings simply because they don’t follow that company’s business model. That’s not competition. It’s coercion,” he said. “Consumers should have the right to choose how they sell their homes.”
