When it comes to some of the country’s most popular real estate websites, what you see isn’t always all you can get. At least, according to an antitrust lawsuit filed this summer by real estate brokerage Compass against Zillow, a listings behemoth that averages 87 million visitors per month.
In May, Zillow instituted a new policy requiring that any publicly-marketed property be listed on its website within 24 hours — or be barred from its site completely. This standard, the company claims, ensures that its users — which include agents, homebuyers, and sellers — have transparent and equal access to all available properties.
Typically, when a home goes up for sale, the seller’s representative feeds information about the property to listings services such as MLS — a longstanding real estate cooperative — and sometimes directly to websites like Zillow. While many brokers hope to get their listings up as soon as possible, some, like Compass, are experimenting with a different approach — marketing select properties to limited audiences before putting them up for sale to the general public.
But Zillow’s new policy effectively bars this kind of “soft launch,” unless brokers are willing to forego the property’s inclusion on the popular platform forever, says Elettra Bietti LL.M. ’12 S.J.D. ’22, a faculty associate with the Berkman Klein Center for Internet & Society at Harvard University.
“Compass has introduced a few pre-market options they call ‘Private Exclusive’ and ‘Coming Soon,’” she explains. “And what Compass is calling the ‘Zillow ban’ is making it impossible for them to continue to do that.”
In a lawsuit filed in June, Compass argues that Zillow’s strategy is not just a simple business decision — it violates laws against anticompetitive behavior and ultimately makes the homebuying and selling process more onerous and expensive.
Bietti, an antitrust expert and assistant professor at Northeastern University School of Law, says that Compass has two distinct — but interrelated — complaints. The first is that Zillow, the most popular real estate listing platform in the U.S., operates as a monopoly and has instituted the policy to jealously guard its market share by preventing competitors from offering innovative new products. Compass also accuses Zillow of colluding with other listings sites, such as Redfin and eXp Realty, to implement similar policies.
“In effect, Compass says that these companies are working together to lock Compass out,” she says.
Antitrust lawsuits are notoriously complicated and can take a long time to litigate, Bietti says. To win on the monopoly claim, she continues, Compass will need to provide copious evidence of Zillow’s outsized influence on the market. And even if Compass can show that Zillow is a monopoly, it will still need to prove that the policy in question is, in fact, excluding competitors or other actors.
Bietti warns that this part of Compass’ suit may be an uphill battle: “It is often really hard to prove and succeed on a monopolization claim.”
But with respect to its second claim — that Zillow and others have colluded to implement similar policies — Compass may have an easier path to success, she says. If Compass can show that Zillow and its competitors entered into the kind of agreement that is per se illegal, such as a group boycott or a hub-and-spoke, Bietti says, “it doesn’t have to get into market shares or any of the other complicated aspects of a [Sherman Anti-Trust Act] Section 1 antitrust analysis.”
The allegations in Compass’ initial filing probably do not quite meet that standard, Bietti adds. “I don’t think they’ve proved enough for that, at least not yet, because you would need evidence that the other market participants came together and agreed to exclude Compass.”
If Compass can’t prove that a group boycott or other per se violation occurred, the court might need to examine the agreement more extensively under the “rule of reason” standard. “With this analysis, the court will weigh the procompetitive aspects of the policy against the anticompetitive harms.”
If Compass can’t provide clear evidence that there was an actual agreement at all — the proverbial backroom deal — between Zillow and the other actors, this too will become a question for litigation, Bietti says. “If Zillow simply advertised its policy to the world and didn’t collude or complete any agreements with any of the competitors, then that’s not enough to constitute an agreement under the Sherman Act. You need to show what is called a ‘conspiracy,’ ‘common scheme’ or ‘meeting of the minds’ which includes objective intent to be part of the agreement.”
A monopoly — or just a successful company?
Of course, Zillow is moving to fight back, and Bietti expects the company to deploy several defenses common to antitrust lawsuits. “Zillow will likely argue that Compass has not defined the market correctly, that they should not be considered a monopoly based on their market share, and that competition is just a click away,” she says.
Bietti believes Zillow will also rely on a key argument used in previous Big Tech antitrust cases. That position, she said, boils down to the idea that Zillow is simply the superior listings website. In other words, it is popular not because it tries to suppress competition — but because users prefer it.
“The classic example is Google, which has been accused of monopolizing the search market for about 20 years now. They’ve always responded by saying, ‘No, we’re just a good competitor. We have just built a better product.’”
But Bietti is wary of how far that argument can be stretched. After all, she continues, antitrust law exists to promote competition, and individual business decisions can still damage the market at large. “It’s fair to say, ‘This is our business model.’ But if you start operating an exclusive policy that disadvantages everybody else, or perhaps your largest competitor, then it will be suspicious evidence for monopolistic behavior.”
It may also argue that its policy benefits the market, she adds. “Zillow could say that at the end of the day, their behavior is welfare-enhancing, because although it is perhaps less friendly to real estate agents and Compass, it may be more friendly to homebuyers and possibly to homeowners who have access to a greater range of options thanks to Zillow.”
Ultimately, Bietti says it can be difficult to predict whether the sides will settle — or settle in for a protracted legal battle on these questions. The political context in which the litigation is playing out may impact how the companies view their options, she says. For now, she adds, neither side seems to be backing down.
“If the case were extremely strong, if Compass finds a smoking gun, it’s possible that Zillow would want to settle. But that doesn’t seem like the situation here,” she says. “At the moment, it seems the sides are beginning the discovery process — and getting ready for trial.”
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