A lawsuit that alleges the powerful National Association of Realtors and home listings giant Zillow illegally conspire to snuff out competition has survived NAR and Zillow’s motion to dismiss the case.
Federal judge Thomas Zilly issued a written order Thursday that found the complaint by real estate brokerage REX plausibly claims, “brokerages, agents, and even customers have no choice but to comply with NAR’s so-called optional rules.”
The Seattle-based judge’s ruling is the latest instance of legal hot water for NAR, a guild for real estate agents that also represents brokerages and advocates for consumers. The Biden administration Justice Department announced in July that they have withdrawn from a consent decree with the trade group to “permit a broader investigation of NAR rules and conduct to proceed without restriction.”
Also, the Biden administration has intervened in lawsuits against NAR – including REX’s complaint. According to Zilly’s ruling, “The United States Justice Department filed a statement of interest asking this court to decline to draw any inference in NAR’s favor from the 2008 consent decree, which is now expired.”
That consent decree dealt with whether NAR-sanctioned multiple listings services could withhold data from consumer facing websites like Zillow – a resolution that arguably enabled Zillow and additional websites like Redfin to blossom.
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REX’s lawsuit stems from Zillow changing how it collects the home listings information it publicly displays. Zillow moved late last year from syndication agreements with various parties to getting Internet data display, or IDX, feeds from Multiple Listings Services.
To get these feeds, Zillow had to comply with the vast majority of MLSs that adopt the NAR’s “no commingling” rule. Under the rule, Zillow was requested to separate out listings from MLS agents with those not part of the MLS. These include homes listed for sale by REX agents, as the brokerage is not part of NAR.
As a result, there is now an “agent listings” and “other listings” tab on Zillow’s website. REX listings are relegated to the “other” tab.
REX calls such separation “the segregation rule,” alleging it “falsely indicates that REX’s listings are not represented by licensed agents” and suggests to the consumer that REX’s listings are somehow inferior.
The Austin, Texas-based brokerage, which hires salaried agents and advertises offering consumers a reduced commission payment, claims its sales “plummeted” since Zillow’s rule.
Part of what REX wanted from filing the complaint was that the judge would issue a preliminary injunction against Zillow’s “other listings” tab. But in a June written order, Zilly roundly rejected REX’s call to enjoin Zillow’s behavior. “Plaintiff has not supported its claim that there is any deception that is injuring a substantial portion of the purchasing public,” Zilly stated.
On Thursday, though, the judge issued a quite different ruling.
Zilly approvingly quotes from REX’s complaint that NAR “is the rare trade association that sets the rule of competition among its members,” and these combined actions “constitute illegal restraints on trade.”
As for Zillow, the judge said that the listings website, whose business now is largely iBuying, “Affirmatively redesigned its website to enforce an allegedly misleading labeling system” that may deceive consumers.
The judge’s ruling is just looking at REX’s legal claims, and not possible facts in the case. If the lawsuit does not settle, the next stage is each party producing evidence to support their arguments.
NAR responded to questions with a written statement from spokesperson Mantill Williams.
“We are disappointed in the decision but remain confident we will provide in court,” Williams stated in part. “NAR remains committed to defending local broker organizations that create highly competitive markets.”
Zillow also replied with a written statement.
“We believe and continue to maintain that REX’s complaints are without merit,” the statement read. “As MLS participants we are required to abide by the MLS rules and regulations.”