Compass Asks Court To Block Zillow From Enforcing Its Listing Standards

Zillow’s listing standards policy, which bans listings on its site that are publicly marketed prior to being entered into the MLS, is slated to go into effect on Monday, June 30. As expected, Compass has taken action. 

On Friday, the Robert Reffkin-helmed Compass filed a motion for a preliminary injunction in its suit against Zillow, which was filed earlier this week. The move would keep Zillow from enforcing the policy next week.

As of June 16, Compass had 6,701 private exclusive listings and 1,325 “coming soon” listings at risk of being banned from Zillow.

“Those agents have spent significant time and resources cultivating strong relationships with their clients,” Reffkin wrote in a declaration in support of the motion. “These relationships often take years to build.

“Sellers often perceive Zillow as a necessary tool to market their homes and find buyers, and I have heard from agents that their clients now fear that their listings could be banned from Zillow because they are using a Compass agent. If the Zillow listing access standards (LAS) takes effect, it will undermine the trust that forms the basis of these relationships, which cannot be easily restored.” 

Investor doubt seeps in

In addition to harming relationships with clients, Reffkin claims that Compass will lose business opportunities because of Zillow’s policy. 

“Compass’s investors and industry analysts have celebrated the 3-Phased Marketing Strategy and commented on the model’s potential to accelerate Compass’s growth, differentiate itself from other brokerages, and help it grow as a real estate search platform,” he wrote.

“I have spoken with several investors who have told me that they are worried about the impact of the Zillow LAS on Compass. This uncertainty and confusion has caused Compass’s investors to doubt the soundness of their investment and the future growth of the company.”

In a memorandum of law in support of the motion, Compass claims that it is trying to “dent the dominance” of Zillow “through an innovative selling approach and cutting edge technological tools,” and that “Zillow has taken notice.”

“But instead of meeting this competitive threat with a better product or increased investments, Zillow and its market rivals have conspired to strangle Compass’s market innovations,” the memorandum states. 

‘Irreparable harm’

According to Compass, due to the early success of Compass’s three-phase marketing plan and private exclusives — which prevented Zillow from monetizing these listings — Zillow “orchestrated a conspiracy to block pre-marketing.” 

In the memorandum, Compass reiterated its claims that despite having not gone into effect yet, Zillow’s listing standards policy has already caused the company ”irreparable harm.” 

“Compass is losing its competitive advantage, losing agents and their home seller clients, and facing ongoing damage to its business reputation. But the ban’s impact is much broader: competition and consumers are being irreparably harmed as well. Innovation is being chilled, and consumers are being forced to give up their ability to choose how they sell and buy homes,” the memorandum states. 

The plaintiff said it was asking the court “to protect the market from these irreparable harms” by granting the preliminary injunction that prevents Zillow from enforcing its listing standard policy. 

Compass also claims that the injunction is further warranted because it is “more likely than not to show that Zillow violated the antitrust laws both by entering into an illegal conspiracy with eXp and Redfin and by abusing its monopoly power.”

It added that “the balance of harms tip decidedly against Zillow as it leverages its power to rewrite the rules of the real estate industry.” Additionally, Compass claims that the injunction “would be in the public interest, protecting competition and consumers from irreparable harm.”

In his declaration, Reffkin claims that the three-phase marketing strategy is “essential to the future of Compass.” 

“It is critical to how we plan to grow our market share by attracting new agents and home seller and buyer clients, getting more listings, and growing our home search platform as a destination in the industry,” Reffkin wrote in his declaration.

“Our value proposition for agents and clients has always been to offer them technology, choice, and freedom. The Zillow LAS prevents us from delivering on that value proposition.”

Expedited discovery sought

In addition to the motion for a preliminary injunction, Compass also filed a motion to expedite discovery — i.e., shorten the evidence-gathering process.

According to a letter from Chahira Solh, Compass’s lead counsel and an attorney at Crowell & Moring LLP, Zillow’s counsel said it would not consent to Compass’s proposed discovery. Sohl said Zillow will file its opposition to Compass’s request for expedited discovery on Tuesday, July 1.

“There is good cause for Compass’s request for expedited discovery because Compass seeks to preliminary enjoin Zillow from the irreparable harm that the Zillow Ban will cause — and already has caused — to Compass, competition, and consumers,” the letter states.

“Compass needs targeted and limited discovery to support its request for preliminary injunction. Specifically, Compass seeks to serve a tailored set of requests for production of documents and interrogatories.”

According to the letter, Compass’s discovery requests “are focused on communications between Zillow and its coconspirators, eXp and Redfin, regarding the Zillow Ban, communications that Compass strongly suspects will show that the companies conspired to boycott Compass, and market information regarding Zillow’s monopoly power.”

When asked about the motion, a Zillow spokesperson said the company had nothing to add beyond its statement earlier this week in which it said the claims in the suit were “unfounded.” 

“Our listing access standards are designed to ensure transparency, equal opportunity, and broad visibility for everyone so sellers can maximize price and time to sell and so buyers have access to all available inventory,” the spokesperson said.

“These practices are widely supported by most brokerages, consumer advocates and fair housing experts, because open access and maximum exposure lead to better outcomes for buyers, sellers and agents alike. Limiting visibility hurts buyers and sellers, disadvantages smaller brokerages, and undermines an open market. Our focus remains on creating a level playing field that serves the best interests of everyone in the home buying and selling journey.”