Compass sues Zillow over its "Zillow ban," alleging antitrust breach

Real estate giant Compass is suing Zillow, alleging that the online property website is violating antitrust laws with a new rule that bans home listings from its platform if they appear on any other service for more than 24 hours before being posted on Zillow.

Zillow's rule, announced by the company in April, took effect on May 28, with the company saying that the new standard is necessary to ensure that listings are "marketed to every buyer" to give house-hunters "fair access to listings without having to get access behind a velvet rope controlled by any one company."

But Compass, which seeks to give some clients a competitive advantage by posting homes before they appear on Zillow and other sites, is alleging that what it calls the "Zillow ban" violates federal antitrust laws. The real estate company claims that ZIllow is leveraging its market dominance to impose the block on listings outside of its website, and that it is aimed at hobbling competition, according to the lawsuit.

"This lawsuit is about protecting consumer choice," Compass CEO Robert Reffkin said in a statement. "No one company should have the power to ban agents or listings simply because they don't follow that company's business model."

He added, "That's not competition. It's coercion. Imagine if Amazon banned a seller for offering a product on their own website first. That's what Zillow is doing in real estate. Consumers should have the right to choose how they sell their homes."

Compass said it has hired Ken Dintzer, a partner in the antitrust division of law firm Crowell & Moring who led the U.S. government's antitrust lawsuit against Google, to represent it in the lawsuit.

Zillow didn't immediately respond to a request for comment.

With the lawsuit, Compass is defending its three-pronged marketing strategy for home listings that it says can better serve sellers. The first step in the strategy is a "private exclusive" listing that is available on Compass' internal platform, which allows its agents to share information about the home with possible buyers.

The second step involves a "coming soon" listing on Compass's website, available to anyone who searches online for properties. The third element involves moving the listing to multiple listing services, or MLS, and onto aggregation sites like Zillow.

"For Zillow, every home buyer search conducted on Compass instead of Zillow is a lost opportunity for Zillow to lock that prospective home buyer into Zillow's ecosystem and make money selling her information to real estate agents for a lead fee — Zillow's central business model," the lawsuit claims.

The complaint alleges that "Zillow doesn't like the 3-phased marketing strategy because Zillow can't make money selling leads off listings in Phase 1 and Phase 2 where they don't have the listings."

Compass, which has more than 33,000 real estate agents, said that almost half of all sellers who signed with them relied on its three-step listing strategy in the first quarter.

"In a free and competitive market, competitors' products and strategies should rise and fall on merit — not the whims of a monopolist gatekeeper like Zillow," Compass claims in the suit.