How Compass’ New Size Could Spell New Problems

What could a lawsuit over $500 say about a billion-dollar behemoth? In Compass’ case, it may offer an early look on the kinds of legal battles the brokerage could face as it solidifies its market power.

The lawsuit filed by a pair of Palm Beach homebuyers claims the transaction fee, which Compass announced in February as a fixed, nationwide policy, amounts to a deceptive business practice. The plaintiffs are seeking class-action status for other buyers in Florida who have been hit with the fee in the last four years.

The lawsuit itself focuses on the legality of Compass inserting “deceptive, unfair and illegitimate” fees into standard contracts. The firm has defended the charge as a “standard practice” in the industry, but the filing signals how the company’s expanding footprint could invite new legal scrutiny.

The fee was attached to a deal closed in June 2024 — over a year before Compass closed on its $1.6 billion acquisition of Anywhere Real Estate, which combined the two largest brokerages in the country by sales volume and brought major brands like Corcoran, Coldwell Banker, Century 21 and Sotheby’s International Realty into Compass’ ecosystem.

In a number of major cities, the deal meant the brokerage was expected to exceed 50 percent market share, according to analysis by the Capitol Forum, an outlet covering regulation in the U.S. Many of the market share totals, which were based on RealTrends data from the previous year, are well above the 30 percent threshold identified by the Federal Trade Commission and Department of Justice merger guidelines.

Attorneys said the core legal issue in the case is relatively straightforward: if the fee was properly disclosed or not.

“The legal issue isn’t necessarily the fee itself, it’s whether the consumer clearly knew about it and agreed to pay it,” said Avenue Law Firm managing attorney Peter Zinovetsky.

Louisiana real estate attorney Marx Sterbcow had an even blunter assessment. “If the buyer agreed to pay the $495 in the employment agreement, there’s nothing illegal,” he said.

If the attorneys can find a class of buyers who signed contracts where there was no fee disclosure, “they’ve got a home run of a case,” according to Sterbcow. But he was skeptical of that possibility given the common use of transaction fees in certain markets.

When The Real Deal reported in February that Compass would be rolling out its transaction fees countrywide, the firm billed the rollout as an expansion of a standard procedure. But it still raised eyebrows as a potential sign of how the company might be able to use the additional pricing power that comes with a larger market share.

“Raising prices does not itself raise antitrust concerns, particularly if done unilaterally, even by a company with large market share,” said Jim Morsch, a partner at Saul Ewing who specializes in antitrust litigation.

The fees play into broader fears about how a consolidated industry can impact pricing for consumers and agents in the long run. And dominance in a statewide or local market that leads to higher commission rates and limited property listings available to competitors could.

The key for an antitrust violation is if a dominant firm’s practices negatively impact consumer choice, such as by limiting property listings competitors can participate in as a buyer’s agent; maintaining higher commission rates by limiting property listings to competitors or in which competing buyer-agents know about and can seek to show their clients; or, tying consumers’ use of affiliated business to their engagement of the brokerage and its agent.

Those conditions appear to be likely concerns as Compass remains on the offense, taking on MLSes to protect its three-phased marketing policy that has been described by critics as effectively private marketing.

On the corporate level, it remains unclear how the newly formed parent company could enforce policies across the brands under the Anywhere umbrella. Compass brokers are subject to its transaction fee and a referral fee program, which allows listing brokers to refer leads to Compass buyer agents and collect a 10 percent fee if a sale closes within 24 months.

As the full might and processes of the new firm come into focus, legal pushback — rather than regulatory intervention —appears to be the most viable avenue for challengers.

In Maym Zillow filed a lawsuit in May against Compass and MRED, alleging the firms violated antitrust laws. The listing giant took issue with the nationwide rollout of the Midwestern MLS’ Private Listing Network, which it claims amounted to colluding to force Zillow into displaying Compass’ listings.

The next month, TRD reported that the New York Attorney General’s Office’s antitrust division is investigating Compass’ market share in New York. The office appears poised to pursue concerns voiced by lawmakers and industry watchdogs about how Compass’ explosion in market share could impact the market, despite the megadeal dodging federal antitrust scrutiny.

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