CoStar Claims Zillow Needs a “Reality Check” in Court Filing

CoStar is wading into a simmering battle between the largest residential listing platform and the largest residential brokerage in the country over who controls home listings.

The data giant asked a federal court to deny Zillow’s motion for a preliminary injunction in the listing platform’s antitrust lawsuit against the Chicago-area Midwestern Real Estate Data and Midwest Real Estate Data and Compass International Holdings, according to an amicus brief filed in the Northern District of Illinois on Wednesday.

CoStar, which also operates Zillow competitor Homes.com, claimed in its motion that granting the preliminary injunction would protect its access to listings “while allowing Zillow to operate its own exclusive pre-MLS listings, withholding them from Homes.com and other competing portals to the detriment of consumers and competition itself.”

Zillow sued MRED and Compass last month, claiming that the companies conspired to force Zillow into displaying listings that are first marketed off its website, in violation of its newly-instated listing policy. One week later, MRED shut off Zillow’s data feed, leaving Zillow with less than half the listings in the Chicago-area of competitors like Redfin and Realtor.com.

Judge John Tharp Jr. granted a temporary restraining order two days later, requiring MRED to restore Zillow’s data feed while the parties prepare for a July hearing on Zillow’s request for a preliminary injunction.

CoStar’s claims

In its amicus brief, CoStar claims that Zillow’s request is at odds with its Zillow Preview product. Launched last month, the pre-marketing tool displays listings from dozens of brokerage partners, including Keller Williams and REMAX, before submitting them to the MLS for broader syndication to other portals.

“A decision granting the Motion risks endorsing Zillow’s proposed anti-competitive,

asymmetric ‘heads I win, tails you lose’ framework,” CoStar said in the brief. “Zillow needs a reality check.”

In the brief, CoStar dissed Zillow’s Preview product and Compass pre-market listing means “each company keeps its pre- market inventory exclusive to its own platforms and unavailable to rivals.”

CoStar also took issue with Zillow’s lead generation business model, saying that Zillow Preview is the company’s “latest effort to funnel buyers and sellers into its integrated homebuying ecosystem, wherein it can deceptively extract profits from those consumers and engage in anticompetitive conduct in a variety of ways.”

A spokesperson from Zillow dismissed Costar’s argument as too closely aligned with the logic of Compass private exclusives, which they called “pay-to-play private marketing.”

“CoStar and Compass are making the same flawed argument: that premarketing and private marketing are the same thing. They are not, and the distinction matters enormously,” a Zillow spokesperson said in a statement. “Zillow Preview is pre-marketing — publicly visible for any buyer to see it, save it and connect with the listing agent directly for free. No buyer is required to work with any specific brokerage to access it.”

The context

CoStar’s filing comes after a difficult year for the company’s own residential platform, Homes.com, in which activist investor Third Point aggressively pushed CoStar to discontinue its multi-billion dollar investment in the platform. CoStar’s stock price has fallen roughly 65 percent to $35 in the last nine months as investors have grown restless with the poor returns generated by Homes.com.

CoStar has sought to position itself as an alternative to Zillow and other lead generation platforms with its “Your Listing, Your Lead” model. Where companies like Zillow generate revenue from referral fees by connecting listing and buyer agents, CoStar charges listing agents a subscription fee to use the platform while promising not to farm out their listing to buyer agents.

The brief is not the first time CoStar has aligned itself with Compass. After Zillow announced its policy banning privately-marketed listings from appearing on its platform, CoStar CEO Andy Florance wrote an open letter calling Zillow’s lead-diversion “anti-consumer and anti-agent” in an open letter to agents, and offering to “boost” listings banned on Zillow for free.

Zillow and CoStar also remain locked in a lawsuit of their own after CoStar sued Zillow last July, claiming that Zillow’s use of more than 46,000 CoStar Group images on its listing website amounts to “mass infringement.”