Compass, Chicago MLS Heads Take Shots at Zillow Hearing

Compass CEO Robert Reffkin and Chicago MLS head Rebecca Jensen turned up the heat in the Chicago federal courthouse Thursday as they slammed Zillow’s crusade against private real estate listings.

Day two of Seattle-based Zillow’s preliminary injunction hearing centered on Jensen’s firm, Lisle-based Midwest Real Estate Data, and its controversial private listing network feature touted by New York-based Compass as a tool to help pre-market homes.

Zillow’s disdain for the private network stems from the fact that homes listed on it are only displayed to brokers subscribed to MRED, and kept off of online listing portals until sellers and their agents move onto MRED’s public-facing platform. Zillow has alleged MRED conspired with Compass through its April agreement for the brokerage giant to syndicate its inventory of private listings across the nation onto MRED’s private network.

Zillow claims their alliance was a scheme to cut Zillow out of the market for real estate listings, and raises anticompetitive and antitrust concerns. The dispute between the three residential real estate titans came to a head in late May, when MRED severed Zillow’s feed of listing data, causing more than 40,000 home offerings to vanish from the portal for a couple days until a federal judge ordered it temporarily restored.

Jensen explained her move to choke off Zillow’s listing data wasn’t a result of pressure from Compass — as Zillow has suggested — but rather Zillow’s alleged breach of an agreement with MRED that prohibits brokerages from declining to display listings based on the identity or affiliation of the agent marketing the property.

“I’m not going to back down,” Jensen testified. “I’m the referee. I don’t care how big Zillow thinks they are on the field.”

Zillow, however, countered that it’s a victim of a conspiracy meant to prevent it from using its own innovations to compete for the first crack at displaying property listings on the web.

Specifically, Zillow has sought to impose its “listing access standards” that prohibit its display of homes that started out getting marketed in channels like MRED’s private listing network and Compass “private exclusives,” which are essentially homes being prepped for sale while kept out of view of consumers browsing their local MLS or online portals, ahead of being marketed on more public platforms.

“Depriving Zillow of listings in Chicagoland or forcing Zillow to abandon its listing access standards harms Zillow, competition and consumers,” said Lawrence Wu, an economist who Zillow called to the witness stand as an expert. “The objective of the MRED-Compass agreement was to block the listing access standards nationwide, rather than a legitimate geographic expansion.”

Reffkin also delivered fiery testimony that framed Zillow as a bully.

He defended Compass’s three-phase marketing strategy, which uses private exclusives before pushing homes to the public MLS. He rejected accusations that these listings are hidden behind a restrictive “black box,” noting that any buyer or agent can access them by contacting Compass.

He also rebutted fair housing criticisms, delivering one of the two-day proceedings’s most explosive quotes to try to discredit Zillow’s accusation that private listings disproportionately restrict market power for people of color.

“I believe Zillow is using historical Black discrimination to protect its power and profits,” Reffkin testified. “Zillow doesn’t care about Black people, they’re using Black people. Zillow isn’t suing us to protect Black people, they’re suing MRED and Compass to protect their dominant market power.”

Reffkin claimed that 94 percent of Compass’s private listings eventually move to the open market. He pointed to internal data showing that homes utilizing this phased strategy sell for 2.9 percent higher, go to contract 20 percent faster, and see 30 percent fewer price drops. He further alleged that Zillow previously offered Compass a $1.3 billion to $1.6 billion annual revenue uplift to abandon its off-Zillow marketing efforts.

Wu testified that MRED and Compass possess dangerous market power, noting that MRED controls 98 percent of Chicagoland listings. Rebutting Reffkin’s numbers, Wu claimed that his study — which had its methodology criticized by an expert economist Compass called — found homes sold on Compass’s private network actually sell for about 4 percent less in Chicagoland as compared to similar homes marketed on the standard MLS (and 4.8 percent less nationwide). Wu warned that the proliferation of private networks creates a “negative spiral” of market fragmentation. The Compass economist, Debra Aron, found the brokerage’s private listings sold for more on average using a revised study method, she said.

But Zillow also pointed out that no other MLS out of the approximately 500 in the nation has threatened to cut its listing feed off for enforcing its standards that block previously private listings. The goal of the standards, Wu said, isn’t to block listings, but to bring more listings to Zillow during their entry to the marketplace by disincentivizing private marketing channels.

Reffkin acknowledged that it works.

“Imagine if Amazon banned anyone who had a private garage sale,” Reffkin said. “It scares people, it’s effective.”

Jensen testified that MRED acted unilaterally to slice Zillow’s data feed after a year of warning that its listing bans violated the MLS’s “objective criteria” rules — a framework she noted was built directly from a 2008 Department of Justice settlement designed to prevent the weaponization of data. She said she was “disgusted” by Zillow’s justification for blocking previously private listings from its platform, which can only be restored when sellers fire their listing agent and hire a new one who puts the home straight onto a public-facing MLS.

Jensen said she would rather face the threat of litigation with Zillow rather than the Department of Justice, and thus chose to enforce the objective criteria by cutting the portal’s listing feed. No other brokerage or MRED participant aside from Zillow has failed to cure a violation of the objective criteria, Jensen said.

She conceded that the ongoing antitrust litigation has become a “contagion” that’s stalling MRED’s plans for national expansion, as outside brokerages grow hesitant to get involved in the legal crossfire.

Both Jensen and Compass regional vice president Fran Broude said they didn’t want to have Zillow’s listing feed suspended, but the MRED head felt forced to cut it after Zillow refused to comply with the MLS rules, she said.

Judge John J. Tharp Jr. is expected to rule on MRED’s motion to kick the case out of court and into private arbitration in the coming weeks. His decision on that could determine whether there’s a more substantive ruling on Zillow’s request for a preliminary injunction that, if granted, could allow it to enforce its listing access standards across data it receives from MRED without the threat of a cutoff. A follow-up hearing in the case is likely to be scheduled later this month.