Compass sues over ‘Zillow Ban,' claiming platform's policy protects monopoly over home listings
Real estate brokerage company Compass has filed a lawsuit against Zillow over its policy to ban private home listings.
In a filing with the US District Court for the Southern District of New York, Compass claims that 'Zillow has sought to rely on anticompetitive tactics to protect its monopoly and revenues in violation of the antitrust laws.'
Compass says that Zillow has implemented an exclusionary policy that says if a home seller and their real estate agent market their property off Zillow for more than one day, that Zillow and its allies, Redfin and eXp Realty, will ban that home from being listed on their search platforms.
Compass claims that 'Zillow has sought to rely on anticompetitive tactics to protect its monopoly and revenues in violation of the antitrust laws.'
Christopher Sadowski
'The Zillow ban seeks to ensure that all home listings in this country are steered on to its dominant search platform so Zillow can monetize each home listing and protect its monopoly,' Compass said in the lawsuit.
Compass alleges that the 'Zillow Ban' was enacted to prevent rivals from competing against it and reduces homeowner choice.
'In a free and competitive market, competitors' products and strategies should rise and fall on merit—not the whims of a monopolist gatekeeper like Zillow,' Compass said.
Compass wants an injunction that would prohibit Zillow from implementing and enforcing its 'Zillow Ban' and implementing and enforcing similar policies. The company also wants a trial by jury and an unspecified amount in damages.
The lawsuit alleges that if a home seller and their real estate agent market their property off Zillow for more than one day, that Zillow and its allies, Redfin and eXp Realty, will ban that home from being listed on their search platforms.
Zillow
Zillow did not immediately respond to a request for comment.
The housing market is always competitive, but has become more fierce of late. Last month the National Association of Realtors reported that sales of previously occupied US homes fell in April, as elevated mortgage rates and rising prices discouraged prospective homebuyers during what's traditionally the busiest time of the year for the housing market.
Existing home sales dropped 0.5% in April, from March, to a seasonally adjusted annual rate of 4 million units, according to the National Association of Realtors. The sales decline marked the slowest sales pace for the month of April going back to 2009 in the wake of the US housing crisis. March's sales pace was also the slowest for that month going back to 2009.
Sales of existing homes barely moved in May, with existing home sales up 0.8% last month from April to a seasonally adjusted annual rate of 4.03 million units, the National Association of Realtors said Monday. Stubbornly high mortgage rates and rising prices made homebuying less affordable even as the inventory of properties on the market continued to increase.
There's also been the issue of more sellers than homebuyers, with potential buyers skittish over high prices and mortgage rates. As of April, the US housing market had nearly 34% more sellers than buyers shopping for a home, according to an analysis by Redfin.
Aside from April 2020, when the pandemic brought the economy and home sales activity to a standstill, there haven't been this few buyers in the market for a home before, based on records that date back to 2013.
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Zillow has said its new policy is in response to sales tactics that have gained popularity over the past year, which limit the visibility of home listings. 'At the heart of this issue is a simple principle: when a listing is publicly marketed, it should be accessible to all buyers—across all platforms, including Zillow,' a Zillow spokesperson said in a statement. 'Hiding listings creates a fragmented market, limits consumer choice and creates barriers to homeownership, which is bad for buyers, sellers, and the industry at large, especially in this inventory and affordability-constrained environment.' Compass' lawsuit comes at a time when the company has faced growing pushback from some of its peers in the real estate industry for its '3-phased marketing strategy' for home sellers. The strategy begins with a private listing to 'test' a home's sales price. 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In Monday's lawsuit, the company said many sellers choose its 3-phase marketing route because homes listed on Zillow are displayed with 'negative insights,' including a 'Zestimate' that estimates the property's value and a 'Climate Risks' section that shows whether a home is susceptible to certain hazards, such as wildfires or floods. 'This lawsuit is about protecting consumer choice,' Reffkin told CNN. Zillow has said such features are included to provide transparency to home shoppers. Compass says the 'Zillow ban' complicates its marketing strategy. Although the rule doesn't directly prohibit private listings, homes listed on Compass' website as 'coming soon' must be published on Zillow within 24 hours. The 'Zillow ban' piggybacks on a 2019 policy, called Clear Cooperation, that was established by the National Association of Realtors, the trade association that often sets the rules for real estate professionals. That policy says that if a real estate agent publicly markets a property (such as by putting it on a website, sending it in an email or posting on social media), they must submit that listing to their local Multiple Listing Service (MLS) within one business day. The MLS is a cooperative database used by real estate agents to share property listings in a streamlined manner. Compass also accused Zillow of conspiring with other players in the real estate industry, its home search competitor Redfin and brokerage eXp Realty, to maintain its market dominance. Both Redfin and eXp Realty agreed to adopt and adhere to Zillow's new rule after it was announced. While Compass accused Redfin and eXp Realty of being co-conspirators, they were not named as defendants in the suit. In a statement, eXp Realty said 'any implication of co-conspiracy is categorically false' and that its business strategies are developed independently. 'It's ironic that Compass, a company that's never turned a profit, is choosing to burn cash and credibility on a lawsuit. And suing Zillow for giving consumers access? That's not strategy, that's desperation,' said Leo Pareja, the CEO of eXp Realty. Redfin did not immediately respond to a request for comment.
