Compass v. Zillow Update: Preliminary Injunction Denied!
Last year, I wrote several articles regarding the push for private listings by Compass Real Estate, and the subsequent legal battle that erupted between Compass and Zillow. These articles can be found here, here, here, and here. In a nutshell, Compass created a private portal for its agents and their clients where they could engage in “pre-marketing”, essentially, testing the waters by utilizing direct channels to make deals with potential buyers outside of the Northwest Multiple Listing Service (the NWMLS). The NWMLS currently requires agencies to follow a policy of clear cooperation, where real estate brokers must put their listings on the MLS within one day of marketing to the public. Compass Real Estate’s strategy conflicts with this policy.
Zillow acted by banning listings that had been marketed for more than 24 hours before being placed on the MLS, known as its “Listing Access Standards” (LAS). This has played out on a national scale, not only implicating the NWMLS, but also the NAR, which governs the Multiple Listing Service (MLS) in many other states.
Compass sued Zillow claiming anticompetitive practices. Specifically, it has alleged three different violations of the Sherman Act. It alleged that Zillow and co-conspirators engaged in restraint of trade to jointly boycott Compass and other entities and violated Sections 1 and 2 of the Sherman Act. Compass argued that Zillow’s LAS constituted “anticompetitive vertical restraint between Zillow and its partners.” Finally, it argued that Zillow abused its monopoly power by adopting the LAS.
The Southern District of New York first found that Compass had standing to bring its antitrust claim because: (1) Compass’s allegations regarding LAS suggest an imposition of restraints on consumers, showing the possibility of anticompetition; (2) most of the listings that received LAS warnings and subsequent removal belonged to Compass, showing injury to the claimant; and (3) LAS caused or threatened to cause the injury to Compass.
However, the Court went on to find that Compass did not meet the standards for a preliminary injunction. To issue a preliminary injunction, the Court must find: “(1) either a likelihood of success on the merits, or sufficiently serious questions going to the merits of the claim to make them a fair ground for litigation, (2) that it is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in its favor, and (4) that an injunction is in the public interest. JTH Tax, LLC v. Agnant, 62 F.4th 658, 667 (2d Cir. 2023) (quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)).
On each of it’s three alleged violations of the Sherman Act, the Court refused to issue a preliminary injunction. Among other things, the Court found:
- Insufficient evidence of a violation of Section 1 of the Sherman Act where Compass could not establish an anticompetitive agreement between Zillow and Redfin, and where such evidence was circumstantial and contradicted by the testimony of witnesses for both companies; and
- Insufficient evidence of a violation of Section 2 of the Sherman Act where, considering the online home search market over a national geographic area, Zillow did not have monopolistic power because: (a) it does not charge for its online search services, (b) it could not exclude competition from online home searches since brokerages still offered private listing strategies to consumers after announcement of the LAS, (c) the removed listings caused minimal harm brokerages where they constituted only 0.06% of new listings for the brokerages on Zillow, and (d) Zillow’s market share did not dissuade prospective buyers from using competitor sites.
The Court opinion contains significant factual detail and additional legal reasoning and conclusions. This post in no way seeks to exhaustively explain the Court’s rationale, but it provides a sense of the Court’s reasoning in denying the injunction.
The decision has been hailed as a victory by Zillow, which considers this outcome a win for consumer transparency. The denial of a preliminary injunction, however, does not end the lawsuit, and it is likely that the dispute will continue to move forward, as both Compass and Zillow play out the war over clear cooperation through the court system. We will continue to keep you updated as further developments arise.
The lawyers at Beresford Booth have significant experience with real estate transactions and disputes, including those involving the purchase and sale of residential and commercial real estate. If you need any legal assistance, please do not hesitate to contact us. Please feel free to contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.