Zillow faces ‘impossible decision’ in confrontation with Compass and Chicago’s MLS

Zillow would either have to abandon what it says are pro-consumer rules nationwide or risk losing its source of listings in Chicagoland unless a federal judge agrees to intervene, the company said in a new filing in its lawsuit against Compass and the MLS that serves Chicago.

Zillow sought a preliminary injunction Monday in a new filing in the U.S. District Court in Northern Illinois, saying it would likely win the lawsuit filed last week against MRED and Compass, that it would suffer harm if the judge did not intervene, and that consumers would also suffer harm.

“Absent an injunction, Zillow will be forced to jettison its pro-transparency practices and help competitors against its will, or else lose the essential listings needed to compete, all of which would degrade Zillow’s services and irreparably harm Zillow’s platform, business, goodwill and reputation,” the company said in the new filing.

At stake in the lawsuit is whether Zillow can enforce its Listing Access Standards, a set of rules created and enforced last year that aimed to stop the spread of private listing networks.

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Compass has tried to get around these rules in an effort to provide more options for sellers who want to market their homes without restrictive rules from the MLSs or portals like Zillow.

The debate has engulfed the industry as MLSs rushed to update their rules for upcoming listings. Four major MLSs – including MRED – have entered into agreements to expand nationwide, change their rules, and receive a direct mention feed from the brands that make up Compass International Holdings.

Zillow said its recently launched Zillow Preview option to display a number of pre-marketed listings rivals private listing networks created by both Compass and MRED.

The company directly named Rebecca Jensen, CEO of MRED, and Robert Reffkin, CEO of Compass, as conspirators in the alleged illegal conduct.

“To protect Defendants from that competitive threat, MRED CEO Rebecca Jensen and Compass CEO Robert Reffkin worked in lockstep — both secretly and publicly — to leverage MRED’s monopoly power and control over Chicagoland’s listing feeds to force competitors like Zillow to display unwanted private listings, abandon pro-consumer policies, and block emerging competitive offerings that privilege access over exclusivity,” Zillow wrote in the new filing.

Now that MRED has members nationwide, the MLS is threatening to shut down Zillow’s direct feed of listings if the portal continues to block pre-marketed listings that violate listing access standards.

The company is still trying to make backup agreements directly with brokers in case the MLS feed is disrupted or shut down. Compass told Zillow on May 8 that it had ended its direct listing feed for all of its brands to Zillow. (Zillow wrote in its new filing that Compass has more than a third of the market share in Chicago.)

In its initial complaint, Zillow said MRED demanded a response by May 19, suggesting Zillow stands to lose its MLS data feed in the nation’s third-largest real estate market unless the judge rules in its favor and issues a preliminary injunction.

Without a favorable ruling from the judge, Zillow says, the company faces “an impossible decision” between abandoning the Listing Access Standards and allowing listings started in private ad networks to “free-ride on Zillow’s platform,” or lose access to MRED listings.

“Both choices cause imminent and irreparable harm to Zillow,” the company wrote.

Losing the source of listings in Chicago, Zillow wrote, “would reduce viewership and affect products that rely on broad sharing of listings, eroding consumer trust in Zillow’s platform and causing a massive but undetermined amount of lost revenue.”

Abandoning the standards would also be harmful, the company argued.

“If Zillow were deprived of that strategy to maintain the quality and quantity of its listings while this case continues, it would face a negative spiral in which the loss of listings leads to less traffic, making its platform less liquid and more attractive overall, impacting its entire business in ways that are impossible to quantify,” it wrote.

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