This week Zillow’s motion for preliminary injunction against MRED and Compass was denied.
By way of refresher, Zillow needed to make a strong early showing to the federal court that 1) they were likely to win their lawsuit based on the limited arguments presented, and 2) that without the PI they would suffer harm that couldn’t be adequately remedied later.
In a 54-page opinion delivered this past Tuesday, Judge Tharp made the court’s position clear: Zillow hadn’t shown they were likely to win, and the harm they faced was both measurable in dollars and — more pointedly — avoidable.
Look no further than the trade press this week and you’ll see unanimous headlines declaring MRED the winner, Zillow the loser. Which is true — in a limited sense. But, as I wrote the day before the hearing:
Don’t laugh at me, but I assumed that when I sat down in that courtroom Wednesday, I’d be watching the case get decided — a judge pronouncing a Winner and a Loser. But that’s not what’s happening this week... at this point, they are all lower-case w’s and l’s in the context of the much longer process toward a final verdict.
So, yes. Zillow took an ‘L’ this week. But if what I wrote this past June about the preliminary injunction was true, that ‘L’ isn’t nearly as big or final as much of the industry has oversimplified it to be. By the same token, the ‘W’ isn’t the end-all, be-all for MRED or Compass, either.
Case in point — at least as I write this — Zillow’s Listing Access Standards are still in effect and MRED has left Zillow’s listing feed solidly in the ‘ON’ position. Sure, MRED could cut Zillow’s feed again without legal consequence. But as of yet, they have not. What Zillow lost this week isn’t the feed. It’s the court order that kept MRED from cutting it. Which makes me question, practically speaking, what exactly has Zillow lost so far?
Also, don’t forget, the final chapter hasn’t been written yet. The claims against MRED now move to private arbitration, while the claims against Compass are paused pending that process. We cannot say with certainty what final decisions or compromises will be reached.
Only time will tell. In the meantime, we’d all do well to resist being reductionistic here.
In that same piece I published before attending the hearing, I concluded with some of the questions I was carrying with me into the courtroom:
Can a local monopoly (MRED) set national rules?
Is Zillow’s harm real, or self-inflicted?
Does “seller choice” actually hold up before the judge?
After a long two-and-a-half months since, we’ve finally got answers directly from Judge Tharp’s pen, so I’d like to revisit those questions now.
On the first question, in hindsight, I’d bring more precision to it and rephrase: “Did Compass and MRED conspire to weaponize the rules of a Chicagoland-based MLS to take a direct shot at Zillow’s Listing Access Standards nationally?”
To me — not a lawyer, not a judge — sitting in the gallery, it sure seemed like Compass and MRED had conspired. As I wrote in my post-hearing reflection, The Outlier:
…we can say at the very least Compass knew it was a strong likelihood that Zillow would lose access to the feed because weeks in advance of MRED flipping the switch to ‘off,’ Compass had begun coordinating an extensive marketing campaign to capitalize on ‘Zillow doesn’t have all the listings.’ Emails showed mock-ups of billboards and messaging strategies to deploy across Chicagoland and beyond that would highlight Zillow’s loss of the feed and point consumers to Compass.com.
I’m not the judge and, thankfully, it’s not my job to adjudicate. But there was enough here to make me say, ‘Huh. This sure seems like a coordinated effort.’
I also pointed out that before Compass entered its out-of-state listings into MRED, there was no active talk of MRED cutting Zillow’s feed — at least none revealed in court. What set everything in motion was Compass partnering with MRED, entering previously banned listings, then having those agents complain to MRED about Zillow not displaying them, all but forcing MRED’s hand to either enforce its rules or waffle.
Interestingly, Judge Tharp addressed Compass’s complaining head on. On p. 25 of his opinion he writes:
Compass was an MRED member affected by MRED’s rules and therefore had reason to respond by ‘complaining loudly’ to MRED, the entity responsible for rule-enforcement, about conduct it believed violated those rules. The Supreme Court has cautioned against inferring agreement merely from complaints followed by responsive action, observing that complaints may be ‘natural’ and ‘unavoidable’ in an ongoing distribution relationship. . . Thus, Compass’s advocacy that MRED enforce its rules, followed by MRED’s enforcement action, is consistent with Zillow’s theory of agreement, but it is also consistent with Compass complaining to the entity responsible for administering the rules and MRED independently deciding how to enforce them. [Emphasis added. Citations removed for clarity.]
More could be said here, especially about the argument Judge Tharp makes on p. 23 for MRED and Compass’s mutual but distinct reasons for opposing Zillow’s Standards and seeking to protect PLN listings. It’s worth reading in full.
For brevity, though, the keys here are that complaining ≠ coordination and, even if it did, coordination ≠ conspiracy. In the opinion of the court, both MRED and Compass acted independently according to their own self-interests.
As I said in The Outlier, “a coordinated effort doesn’t necessarily mean foul play,” and Compass may just be engaging in “a-whole-nother level of shrewdness” in their business practices.
So, while the court found no conspiracy, I’ll still go on the record saying: I do not like how Compass is conducting business. I do not like that a Compass agent with a Zillow-banned listing in Florida was encouraged to join MRED (the Midwest Real Estate Data), enter their banned listing, and then have Compass execs complain to MRED about Zillow’s failure to display the listing until MRED decided to enforce the rule.
Even if Compass played by the rules legally speaking, in my house we call maneuvering like that manipulation.
But this isn’t my house. So make your own opinion, and we’ll keep moving along.
I’m going to bundle questions two and three because they are more interconnected than I originally realized.
Those questions, again, were “Is Zillow’s harm real, or self-inflicted?” And, “Does ‘seller choice’ actually hold up before the judge?”
On harm to Zillow, the court said, “Harm resulting from loss of access to the listing feeds is … entirely avoidable” (p. 52). All Zillow had to do was stop enforcing their Standards against any listing entered into MRED — from Chicago or anywhere else — and their feed would stay on. Judge Tharp was even blunter on Zillow’s brand-damage argument. It’s worth quoting him directly rather than summarizing:
Without a comprehensive inventory of listings, including those on PLNs, Zillow contends, it will be unable to compete effectively because listings that have previously been marketed on a PLN are stale and of less interest to buyers.
That makes no sense. Consumers viewing listings on Zillow don’t know whether listings have been marketed on a PLN before listing on Zillow. They have no basis to conclude that the listings were previously listed on a PLN—unless, of course, they saw the property on a PLN before it was on Zillow. [Emphasis added]
But Zillow’s argument was not just that it was harmed by PLNs — it was that consumers were harmed, too. Less exposure for sellers. Less available inventory for buyers. Zillow’s brand promise has been closely tied to market transparency. And Zillow created its Standards to defend the market, not just themselves.
As it turns out, Zillow’s commitment to market transparency may be critical to its success in the court of public opinion, but in federal court, that commitment carries very little weight. The key quote from Judge Tharp is here:
Zillow repeatedly characterizes the relevant competitive harm in terms of reduced ‘transparency’ . . . Indeed, the Court notes that the word ‘transparency’ is repeated over 300 times in the parties’ briefs. But transparency is not, standing alone, a goal of the antitrust laws and opacity is not an anticompetitive effect under the Sherman Act. [Emphasis added]
Since the court’s primary concern is competition — not market design, transparency, or opacity in and of themselves — the judge’s reasoning gives considerable weight to the proposition that private and phased marketing can expand seller options (p. 43), and that a lower sale price from a strategy “the seller themselves chose (for privacy or convenience, for example) is not necessarily evidence of consumer harm” (p. 40).
The phrase “the seller themselves chose” is doing a lot of work here. A choice isn’t an informed choice just because the seller technically selected it. I’ve written extensively about my skepticism about how sellers are presented with phased marketing approaches and their ability to give informed consent to the tradeoffs.
But pushing this thread any further will quickly devolve into the same arguments we’ve been having for months about the merits and dangers of private exclusives and private listing networks.
At the very least, we have another data point here that shows courts are sympathetic to giving sellers more options for marketing their home. What’s disappointing is that the costs “seller choice” imposes on buyers never enter the analysis. The court doesn’t seriously opine on the buyer experience at all.
That’s not to suggest that Judge Tharp is saying market transparency and buyer accessibility don’t matter — he’s just saying that ruling on those issues is outside the scope of his responsibility.
Fine.
But that leaves us with a heavier question: Whose job is it?
Seriously.
Whose job is it to ensure every buyer has full, equal access to every available home on the market?
Whose job is it to ensure that every piece of information a buyer needs to make an informed purchasing decision is readily accessible?
Whose job is it to ensure every seller understands the full set of tradeoffs and incentives that motivate their agent’s recommendation of a phased marketing plan?
It’s not NAR. They’ve abdicated that responsibility.
It’s not MLSs. They answer to their subscribers — brokers and agents — not consumers.
And, frankly, it’s not Zillow, either. While I applaud their Standards as an effort to preserve a more transparent housing marketplace, as a publicly traded company with their own profits to protect, it’s not their job to set or enforce the rules of the market.
The straight-up answer is that no one in this industry is responsible for whether a buyer gets to see every home for sale. Nobody has the authority right now to enforce market transparency. Instead, we’re dependent upon the virtue of the professionals who run this industry. And, at least from my vantage, virtue is in short supply.
Maybe that’s cynical. But I think it’s honest.
For most of the industry, controlling listings, data, and market access can make consumers more dependent upon us. More people dependent upon us means more transactions, more transactions mean more agents, and more agents means more money for brokerages, portals, MLSs, and associations alike.
But how much of that dependence is artificial, created by moving the gates further up in the homebuying process? How much of that dependence is being created by taking information and access away? Who is actually creating more value for consumers rather than just coming up with creative ways to extract more dollars from them?
In other words, who’s there to curb corporate greed?
After this week’s ruling, I don’t think there’s a good answer to that question, which is a real loss for consumers.
Capital ‘L’.
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Excellent piece, Nick!