Zillow Legal Fights Ramp up with Compass, FTC and MLS

The gavel hasn’t come down on Zillow’s courtroom battle with MRED and Compass, but the online listing portal is already preparing to face off against the Federal Trade Commission in another antitrust battle in a Virginia courtroom.

Both antitrust lawsuits, though unconnected, add to the string of legal fights that the Seattle-based company has been involved in over the past year, including a class-action lawsuit against its flex agent program and an alleged copyright violation.

In Virginia, Zillow’s $100 million rental listing syndication deal with Redfin — a competitor and entity of Rocket Companies — will be scrutinized on trial next month in a lawsuit initiated by the FTC and backed by five attorneys general.

Plus, Zillow’s persistent squabbles with Compass extended into new territory this week as Compass filed several Code of Ethics complaints against Zillow, alleging false advertising claims across 26 states, 55 MLSs and 30 Realtor associations. This adds to dispute over Zillow’s listing access standards, where it has been accused of labeling available properties as “not for sale,” HousingWire reported.

Here’s where things stand in antitrust courts for Zillow:

What’s happening in the Virginia lawsuit brought on by the FTC?

The FTC along with the attorneys general of Virginia, Arizona, Connecticut, New York and Washington has alleged that the $100 million deal is an “illegal agreement” that suppresses competition from Redfin in the advertising market for apartment rental listings.

The FTC’s complaint argues that by agreeing to the deal, Redfin, which operates websites like Rent.com and ApartmentGuide.com, steered its advertising customers to Zillow, vowed not to compete with the company for at least nine years and agreed to serve merely as an exclusive syndicator of Zillow listings.

Both Zillow and Rocket Cos.-owned Redfin have defended their “partnership” — a characterization contested by the FTC lawsuit — claiming it fosters competition.

“[It has] actually strengthened Redfin’s ability to compete in the market. They went from having somewhere in the neighborhood of 10,000 listings to 70,000 listings available to consumers who are shopping on their sites, helping them increase their traffic,” Zillow’s VP and Assistant General Counsel Shannon Cartales told The Real Deal.

Cartales added that Redfin is benefitting from the increased traffic and generating revenue off the leads from Zillow.

FTC’s request to block the deal ahead of trial failed in early July and the case is now slated to start Aug. 24.

What’s happening in the Zillow v. MRED and Compass antitrust lawsuit?

In its other antitrust legal fight in Illinois, Zillow and defendants Compass and Midwest Real Estate Data, the Chicago multiple listing service known as MRED, are fighting over their respective handling of pocket listings and private offerings as the matter awaits Judge John J. Tharp Jr.’s decision.

Compass and MRED have pushed back against Zillow’s claim of conspiracy and harm to Zillow and both sides have maintained that their marketing strategies afford them a different edge on the question of transparency of listings.

“Even if Zillow could show any likelihood of success (which it cannot), it falls far short of the required ‘clear showing’ of irreparable harm in the absence of a preliminary injunction,” the defendants argued in a supplemental brief submitted Thursday.

Compass and MRED added that private listings promote competition in residential real estate marketing and that Zillow’s claim would limit a seller’s choice to market their property.

In response, Zillow on Monday pursued its claim that MRED and Compass had conspired to cut off Zillow’s listing access, which Zillow previously called the “lifeblood” of its business. Zillow further rejected MRED head Rebecca Jensen’s claim of acting unilaterally in cutting Zillow’s data feed as “self-serving testimony” and “not credible.”

Zillow also stated that it endorses pre-marketing “when done transparently,” referring to its product Zillow Preview.

The tension in this case over private listings is a grey area that the real estate industry has been struggling with, according to David Kully, an antitrust lawyer with Holland & Knight.

“If the end result of this [lawsuit] is a more fragmented marketplace with less transparency where you can’t go to a single real estate agent and know all listings that are on the market at any moment, that would be terrible for the consumer,” Kully told The Real Deal.

Even as the court decides whether Compass’s marketing strategy undercuts multiple listing services and the ability to show all listings to all buyers, Kully feels the matter could evolve to include more state legislatures. Both Wisconsin and Washington have required sellers to market their listings publicly. But the laws have little teeth as they allow sellers to explicitly opt out of MLS exposure should they choose to. States like Illinois, Connecticut and Hawaii have attempted similar such laws that haven’t yet passed legislative muster.

Judge Tharp is expected to decide on the matter later this month.

“At the heart of these two cases, Zillow is defending its belief that an open and transparent real estate market and access to listing information is important and valuable for consumers,” Cartales said.