Lawyers Weigh In On Compass, Zillow’s Antitrust Argument

While the hearing held last month in Compass’s antitrust lawsuit against Zillow was focused on the former’s preliminary injunction motion, testimony provided a preview of what the industry could expect if the case goes to trial.

Over the course of the four-day hearing, much of the testimony focused on Compass’s request that Zillow be barred from enforcing its listing access standards policy. However, the two parties also addressed Compass’s antitrust claims of restraint of trade and monopolization.

Background on the lawsuit

Compass filed the lawsuit over Zillow’s policy, which bans listings that have been publicly marketed for more than one business day prior to them being available for display on Zillow, in mid-June. They then filed its motion for preliminary injunction just days before the policy was set to take effect. 

During the final day of testimony at the hearing, both parties addressed the antitrust claims, with Compass’s legal counsel claiming that the ongoing communication between leaders at Zillow and Redfin, which announced but never enacted a nearly identical policy, was evidence of collusion, that the policy harms both Compass and industry competition, and that strategy documents presented as evidence illustrate Zillow’s monopoly power.

In contrast, Zillow’s attorney claimed that there was no evidence of collusion between itself and Redfin, and that Zillow has no duty to deal with Compass and strong “pro-competitive justifications” for the policy.

What the attorneys say

Under antitrust law, if a policy is found to harm competition, it can be allowed if there is evidence that the policy actually benefits the consumer and that there are no other less anti-competitive ways to achieve the same results. 

“If the defendants are able to show some pro-consumer benefits that outweigh the anti-competitive nature, and of course there are exceptions, but the majority of the cases where this happens, the defendants win,” Bradley Weber, the co-chair of Locke Lord’s antitrust practice group, said. 

For Harrison McAvoy, a partner at Shinder Cantor Lerner LLP who specializes in antitrust law, Zillow did not present any strong pro-consumer justifications for the policy at the hearing. 

“Compass offered evidence of an effect on Compass and an effect on competition generally, as well as harm to consumer choice, related to seller’s having a say in how their home should be marketed,” McAvoy said. “It’s not clear that Zillow has rebutted in any way the notion that the policy stops sellers from choosing how their home should be marketed.” 

In McAvoy’s view, Zillow’s main argument is that the policy benefits both buyers and sellers, but he finds it questionable that sellers would benefit from having fewer choices in marketing their homes.

“It seems that Zillow would need to show that agents are affirmatively harming their clients by marketing homes publicly but not on Zillow even if that’s only for a short period of time,” he said. 

He added that based on the evidence presented, it remains unclear how buyers are harmed by having to look somewhere other than Zillow to find listings. Moving forward, for Zillow to present a better argument, he said the defendant will need to explain exactly how the policy benefits buyers and sellers and prove that those benefits overcome the harm to seller choice. 

In contrast, Weber feels that Zillow presented a strong case, as he feels the crux of Compass’s claim is that Zillow has a duty to deal with Compass on its terms, which he said is a very challenging type of claim to prove in an antitrust case. 

Differing opinions

As no one company has a duty to deal with another, in order to prevail, Weber said Compass would have to show that Zillow had a pre-existing voluntary and presumably profitable course of dealing with Compass.

“This would be that Zillow is dealing with Compass, in terms of allowing Compass to list properties on the Zillow platform, and that by terminating it, it showed a willingness to forsake short-term profits to achieve an anti-competitive end,” Weber said. “Compass didn’t even really try to argue that in my opinion, and I haven’t seen any information on the policy reducing Zillow profits or that it had some anti-competitive motive.” 

In Weber’s mind, Zillow presented a compelling case that the rule was designed to create more transparency by ensuring that consumers can see all available inventory. 

“To me, it makes sense that it would benefit consumers to have a one-stop shop where they could look at all the listings instead of having to go to each brokerage’s site to see them,” Weber said.

Ruling on the injunction motion

While Weber and McAvoy disagree on which party made a better case, they do agree that whichever way the judge rules on the preliminary injunction motion will provide some insight into which way the judge is leaning in the overall case, based on the evidence presented thus far. 

However, Weber noted that less can be read into the motion being denied, as that could simply just mean that Compass was unable to meet the burden of showing that it is likely to prevail at trial.

“But I do think that if the court denies the injunction that would tend to indicate that the court is agreeing with Zillow’s position,” Weber said. 

Regardless of the outcome, he said he will closely be watching for the judge’s opinion as he feels the wording will provide valuable insight into how the court views the case. 

As of early December, it remains unknown as to when the court will issue a ruling on the motion. The parties have until Friday to file any further post-hearing papers setting out findings of fact and conclusions of law.