Compass’s hearing regarding its preliminary injunction motion in its antitrust lawsuit against Zillow concluded on Friday with closing arguments from both sides. The hearing, which is being held in New York City under the auspices of U.S. District Court Judge Jeanette Vargas, will be used to decide Compass’s motion seeking to block the enforcement of Zillow’s listing access standards policy.
Lawrence Wu back on the stand
During his testimony, Wu, who served as an expert witness for Zillow, said he was viewing the suit as a refusal to deal case, noting that Zillow doesn’t monetize listings because Zillow does not sell the listing. He also argued that there are pro-competitive justifications for the policy, including that it protects Zillow’s access to listings “which is a critical input for Zillow,” that they help Zillow protect its value proposition, and that they prevent the fragmentation of the listings, which he said is bad for consumers.
‘Compass is a partner’
Zillow’s counsel Eric Tuttle, an attorney from Wilson Sonsini Goodrich Rosati, delivered Zillow’s closing arguments. He argued that Zillow’s policy is pro-competitive and designed to maintain a transparent and comprehensive online home search market.
He also argued that Compass’s lawsuit is an attempt to force Zillow to subsidize its three-phase marketing strategy, which Tuttle argues would lead to fragmentation and consumer harm. According to Tuttle, Zillow’s policy was put in place to prevent other brokerages from feeling pressured to launch their own private listing networks, which Zillow argues would create a race to the bottom for the consumer experience.
In addressing Zillow’s market power, Tuttle told the court that while sellers may choose to avoid Compass’s three-phased marketing strategy for fear that their listing may be banned from Zillow, this doesn’t prove that Zillow has market power. Instead, he said it proves that sellers rationally value broad exposure on a major platform.
Compass ‘having the best quarterly results of its existence’
Tuttle also addressed Compass’s claim that the policy was causing it irreparable harm, noting that “Compass is having the best quarterly results of its existence.”
“In statements to investors and others, at least by omission, it is telling investors and acquisition targets that Zillow’s listing access standards don’t pose any material financial risk to Compass,” Tuttle said.
Zillow also cited an email sent by Compass CEO Robert Reffkin to Compass’s head of investor relations Soham Bohsle, in which Reffkin wrote that “CCP [NAR’s Clear Cooperation Policy] and the Zillow ban helps Compass financially.” Tuttle also argued that if Compass were to stop using its three-phased marketing strategy, it would not threaten the entire viability of Compass as a business.
Antitrust claims against Zillow
Next, Tuttle addressed Compass’s two antitrust claims against Zillow, arguing that there is “simply no evidence” of an agreement between Zillow and Redfin to boycott Compass and that there is no showing of market power. He also argues that Compass’s monopoly antitrust claim is based on a “highly disfavored duty to deal theory,” and that Zillow has strong pro-competitive justifications for its policy.
“Compass has no evidence that Zillow’s standards will lessen competition in the home search market as opposed to merely harming a competitor,” Tuttle stated.
Seeking control
Compass’s closing arguments were presented by two of its attorneys, Chaira Solh and Kenneth Dintzer, who are both members of the law firm Crowell & Moring. According to Solh, Zillow’s policy is about it seeking control over the market and that all parties, including buyers, sellers and agents are harmed by the policy.
“Not every buyer is looking for the lowest priced home and not every seller is looking for maximum price,” Solh said. “It is really about choice, and I think that is what it comes down to. From Compass’s perspective, there’s harm to competition and harm to consumers overall because they don’t have the choice of how they might want to market their properties or how they might want to go to market to buy or sell.”
Solh also claimed that based on the evidence presented, it was clear the Compass was the target of Zillow’s policy, noting that Compass agents accounted for the majority of all the listing violations issued by Zillow, which she said illustrates a harm to competition.
She also addressed Compass’s claim of irreparable harm arguing that the policy causes Compass to lose a product offering, which she said means losing the “exponential income” generated by the repeat and referral business that would occur after one consumer successfully transacted through Compass’s private listing network or used its three-phased marketing strategy. According to Solh, the policy also stifles a $2 billion investment Compass made in its technology to support offerings like its three-phased marketing strategy.
Dintzer took over the remainder of Compass’s closing remarks to address its two antitrust claims. According to Dintzer, the ongoing communication between Zillow and Redfin, beginning with its $100 million rental syndication deal announced in February and continuing with the ongoing communication between company executives. He also claimed that Zillow modified the FAQ about its policy to clarify that brokers must send the listings to the MLS to satisfy the policy, ensuring Redfin, as well as others who rely on IDX feeds, would also receive the listings.
As for Compass’s claim that Zillow is a monopoly, Dintzer highlighted Zillow strategy document outline its “hardline plan” to keep sellers and agents on its site as an example of Zillow “proclaiming it has market power.”
He also argues that the policy is anticompetitive, as it stops “competition in the search box.”
Judgement day
In addition to hearing closing arguments from the parties, observers also got some insight into the thoughts of Judge Vargas. During Zillow’s closing remarks delivered by Tuttle, she questioned the assertion that any harm to Compass caused by the policy was speculative, citing the investment of time and money Compass put into launching its three-phased marketing plan.
She also concluded that it was clear based on the evidence that Zillow’s intention was “to make it harder for them to carry forward with three-phase marketing; it was the stated intent internally of the policy-makers.”
Judge Vargas also pushed back on the “irreversible” market harm Zillow claims would occur if the injunction was granted, asking Tuttle why the market could not simply revert if Zillow were allowed to re-implement the ban after a trial victory.
As for Compass’s arguments, Judge Vargas expressed strong doubt over the viability of Compass’s conspiracy claims stating that she had “not seen the evidence that convinces me that there was either an argument or that there was parallel conduct with a plus factor” for the conspiracy claim with Redfin. She also challenged Dintzer’s assertion that Zillow changed its FAQ to require MLS submission, noting that there was no evidence Zillow ever intended to bypass the MLS in the first place.
With regards to Compass’s monopoly claims, Judge Vargas questioned whether the alleged predatory conduct was aimed at the relevant market, asking if all the evidence pointed to Zillow’s intent being focused “on the brokerage side of the business” and not suppressing Compass.com as a home search competitor.
The parties have until December 5 to file further post-hearing papers setting out findings of fact and conclusions of law. A ruling on the motion is not expected potentially for several weeks.
English