Compass urges New York judge to lift Zillow ban on competitors’ real estate listings

MANHATTAN (CN) ­— Two of the biggest online companies in residential real estate, Zillow and Compass, faced off in Manhattan federal court on Friday over what Compass claims is Zillow’s monopolistic listing policy.

The closing arguments on Friday afternoon capped off a weeklong evidentiary hearing before U.S. District Judge Jeannette Vargas, who will rule on Compass’ motion for a preliminary injunction to halt enforcement of Zillow’s listing standards. Sellers are required to list homes on Zillow within one business day of them appearing on the industry’s cooperative multiple listing service database, or risk suspension from listing properties altogether on Zillow.

Compass sued Zillow for civil antitrust violations in June, accusing the most widely used real estate marketplace in the United States of gatekeeping and anticompetitive tactics.

To protect its throne, Compass says, Zillow conspired with at least two competitors, Redfin and eXp Realty, to instate what it calls the “Zillow ban.”

“Simply stated, the Zillow ban mandates that if a home seller and her agent market a home off Zillow for more than one day, then Zillow and its allies will ban that listing from their search platforms, making the home invisible for many buyers,” Compass wrote in its lawsuit.

Compass accuses Zillow of using the ban to steer home listings toward its own platform, dampening competition and limiting homeowners’ choice in violation of the Sherman Act. The company seeks a preliminary injunction to temporarily bar Zillow from enforcing the challenged listing standards while their civil complaint is litigated.

Represented on Friday by attorney Chahira Solh, Compass argued that the company risks irreparable harm to its competitive advantage and reputation from the so-called “Zillow ban,” along with harm to consumers who would benefit from competition and choice in the home search market.

Solh said Zillow’s listing standards were a reaction to Compass’ three-phase marketing strategy, based on “premarketing” efforts to sell a home before it is listed on Zillow and other major sites for broad distribution.

“This is a case about choice versus control," Solh said Friday. “Compass provides options and not a mandatory policy.”

But the judge pushed back against Compass lawyers as to whether the case had seen evidence beyond just parallel conduct that there was an illegal conspiracy between Zillow and competitors about what listings will be displayed on their sites.

“Why is this just not common action taken by competitors in response to common stimuli?” asked Vargas, a Joe Biden appointee.

Zillow, based in Seattle, contends that it’s not required by antitrust law to display Compass listings, regardless of whether or not it has market power. Zillow also asserts that it has no duty to deal with or assist a competitor like Compass on its preferred terms.

“Compass’ theory is a refusal to deal theory, and a refusal to deal with a competitor is not an anticompetitive conduct under the antitrust laws unless you’re in an Aspen Skiing situation,” Zillow’s attorney Eric Tuttle said Friday, referring to the sole exception to the right of refusal to deal established in a U.S. Supreme Court case from 1985, where a ski resort’s decision to terminate a deal with its smaller rival without a legitimate business reason was found to be anticompetitive.

“The facts of this case are nothing like *Aspen Skiing,”*said Tuttle, from Silicon Valley-based Wilson Sonsini Goodrich & Rosati.

In order to win a preliminary injunction, Tuttle argued that Compass is required to show “injury to competition, not just to a competitor.”

“There’s been no evidence of a market-wide reduction in competition, of raised prices, of reduced output or reduced quality,” he said at the conclusion of Zillow’s closing argument.

Vargas questioned both sides as to who are the “relevant consumers” she need to look at as potentially harmed by the anticompetitive conduct, whether it was buyers or sellers or real estate agents. She did not rule from the bench at the conclusion of closing arguments and has not said when she is likely to issue a written ruling.

The four-day evidentiary hearing in Manhattan federal court included witness testimony from both companies’ top executives: Compass CEO Robert Reffkin and Zillow CEO Jeremy Wacksman.

Three months after Compass filed its antitrust complaint, the Federal Trade Commission sued Zillow and its competitor Redfin over a $100 million payment to cease advertising multifamily rental properties, an apparent effort to stop competition.

In the lawsuit, filed in September in Virginia federal court, the FTC claimed that the anticompetitive deal violates the Sherman Act and the Clayton Act.

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