Compass and Zillow debate irreparable damage to hearing
The policy, which went into effect June 30, prohibits listings from the site that have been publicly marketed more than one business day before the listing is available for display on Zillow. Compass filed a lawsuit against Zillow in mid-June, just before the enforcement deadline, claiming the policy stifles competition and causes irreparable harm to Compass.
Inconsistent messages
Elizabeth Ashton Alexander, Compass’ senior vice president of strategy and operations, continued her testimony Thursday morning, beginning with her cross-examination. During her testimony, Alexander acknowledged that she had previously signed a statement saying she knew that all Compass private exclusives violated Zillow’s policies and could potentially be banned from the portal.
Despite this knowledge, she acknowledged that Compass continued to promote its three-phase marketing strategy, writing in an internal email that was presented as evidence that Compass was “full steam ahead on three-phase marketing.”
She also acknowledged during cross-examination that the reduced adoption of the three-phase marketing strategy did not necessarily mean Compass lost listings. During her testimony, she interpreted an email showing a seller who learned of Zillow’s policy on NPR refusing to allow private exclusives or upcoming listings but still working with a Compass agent.
Next on the witness stand was Neda Navab-Boshehri, the president of Compass’ brokerage business. During her testimony, Navab-Boshehri stated that the policy caused homeowners to immediately opt to use the three-phase marketing strategy and that agents were concerned that their listings would be excluded from Zillow, making them reluctant to pitch the marketing plan to their clients. This resulted in Compass having to dedicate significant resources to creating training materials to help officers understand the policy, Navab-Boshehri said.
In training slides presented into evidence during her cross-examination, Compass tells its agents that its “three-phase marketing strategy is 100% compliant with Zillow’s new policy.” The slide also states that Compass has confirmed this with Zillow. Zillow attorney Bonnie Lau asked whether Compass had ever changed these training materials to reflect how the policy would affect Compass’ private exclusives, as expressed in Alexander’s statement, but Navab-Boshehri said she was unsure whether the materials had been updated.
Competitive or anti-competitive?
Following Navab-Boshehri on the stand was Debra Aron, an economist and expert witness for Compass. Aron was retained by Compass to define a relevant antitrust market, determine whether Zillow has market power in that relevant market, assess whether Zillow’s policies are anticompetitive, and provide an opinion on whether the evidence presented shows that consumers would suffer irreparable harm if Compass’ preliminary injunction were not granted. According to her testimony, the relevant antitrust market consists of online home search platforms in the US and Zillow has market power in the relevant market.
In addition, she said she concluded that Zillow engaged in an “anticompetitive strategy to protect its market power by depriving its rivals of the ability to differentiate the inventory on the platform they control from the inventory on Zillow’s platform.” She added that Zillow’s policies harm competition in the relevant market she identified.
According to Aron, Zillow’s policy is anticompetitive because it suppresses competing platforms, which Compass claims Compass.com is (Zillow executives have stated during testimony that they view their competitors as Redfin, Realtor.comAnd Homes.com) differentiate because agents are afraid to try new strategies for fear of having their listing banned from Zillow.
Harmful or useful?
When it comes to irreparable damage, Aron testified that Zillow’s policy prevents buyers from potentially seeing properties that they could only have afforded or accessed during the early-stage marketing phase, and that sellers could miss opportunities to pre-market or price test their home. During cross-examination, Aron acknowledged that she had not found any evidence of price effects in the market, as the market has no prices, and that she had not observed any market-based production reductions or a change in the number of private listing networks as a result of the policy.
The next witness called was Soham Bohnsle, Compass’ head of investor relations. During his testimony, Bohnsle confirmed that Compass had no concrete evidence linking its three-phase marketing strategy to changes in sales and that despite Compass’s claims that the policy was causing irreparable damage, no analysts had issued a “sell” rating on Compass stock.
Under questioning by Zillow counsel, Bohnsle also confirmed that Compass has continued to post annual revenue increases since announcing the policy.
Zillow’s counsel also asked him why Compass did not specifically disclose the threat he said Zillow’s policies posed. However, under cross-examination, he reaffirmed his belief that Compass’ general risk factor language in an SEC filing covers Zillow standards under “industry changes.”
The final witness of the day was Lawrence Wu, an economist and president of NERAa global economic consultancy firm. He served as an expert witness for Zillow. Unlike Aron, Wu said he found no direct evidence or sufficient circumstantial evidence that Zillow has market power, noting that multiple platforms compete for buyers in each market. He also endorsed Aron’s assertion that the market is national, stating that competition occurs locally as buyers search for homes within specific geographic areas.
Wu also testified that Zillow’s policy is pro-competitive and rejected claims that the policy was intended to exclude competitors. Additionally, he stated that he saw no evidence of decreased production, increased prices, decreased quality, or decreased consumer choice on online home search platforms as a result of Zillow implementing this policy.
The hearing concluded Friday with closing arguments from both sides. Judge Vargas is expected to rule on Compass’ preliminary injunction within the coming weeks.
