Startup sues Zillow for suppressing lower-fee listings

Rex uses machine learning to lower commissions

National /
Mar.March 09, 2021 04:45 PM
Rex CEO Jack Ryan and Zillow CEO Rich Barton. (Jack Ryan via LinkedIn, Rich Barton via Zillow Group)

Rex CEO Jack Ryan and Zillow CEO Rich Barton. (Jack Ryan via LinkedIn, Rich Barton via Zillow Group)

A startup brokerage hit Zillow Group with an antitrust lawsuit on Tuesday, alleging the listing giant stifles competition and ultimately leaves consumers stuck with high commission fees.

Rex — Real Estate Exchange, a VC-backed brokerage based in Austin — claims that Zillow recently made changes to its website that prevent buyers from seeing all available listings, including lower-fee listings from independent firms.

In a statement, Rex CEO Jack Ryan, a former Goldman Sachs executive, said Zillow has backtracked on its mission to help consumers and instead is “focusing on their own profits,” Bloomberg News reported.

Rex’s suit is the latest front in a battle that’s been playing out in the residential brokerage industry over its traditional commission structure. Last year, the National Association of Realtors settled a Justice Department complaint accusing it of reducing competition.

Rex, which has attracted $135.5 million from investors since 2015, uses machine learning to market homes and as a result says it’s able to charge sellers lower fees. (Rather than the typical 5 percent to 6 percent, it charges an average of 3.3 percent of the sales price.) The company claims it has saved homeowners $30 million to date.

The complaint focuses on Zillow’s website redesign this fall, which coincided with its launch of a national brokerage. At the time, Zillow said it obtained broker licenses to facilitate its iBuying, or instant home-buying, business.

In January, Zillow also said it would start taking listings data via an IDX feed, which transmits listings directly from multiple listing services (MLSs), instead of the patchwork of agreements it had in place with hundreds of brokerages.

To comply with NAR’s co-mingling rules, Zillow had to display non-IDX listings, such as those that are for-sale-by-owner, on a separate page. Those include Rex listings, since the company does not market homes on the MLS.

In the complaint, Rex said it saw a steep drop in the number of views its listings get on Zillow, and called the website redesign deceptive and a violation of antitrust laws.

“Consumers — buyers and sellers — now experience reduced choice in transacting real estate,” Rex said in the complaint. “Competition from Rex, which allows buyers and sellers to lower commissions to get more home for their money, is suppressed and it loses customers.”

In a statement, Zillow defended the way listings are displayed and said it made changes to its site to comply with NAR rules. “We are aware of the lawsuit and believe the claims are without merit and intend to vigorously defend ourselves against it,” Zillow said.

NAR did not respond to a request for comment.

[Bloomberg News] – E.B. Solomont





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