An antitrust lawsuit alleging Zillow Group conspired with certain real estate brokerages to hide Zillow’s home value estimates on certain listings is back.

An antitrust lawsuit alleging Zillow Group conspired with certain real estate brokerages to hide Zillow‘s home value estimates on certain listings is back.

In the original Jan. 15, 2018 complaint, EJ MGT LLC, a New Jersey-based company that owns 142 Hoover Drive, an 18,000 square-foot, seven-bedroom, 10-bathroom home in Cresskill, New Jersey, blamed the home’s failure to sell on buyers being turned off by the Zestimate on the property’s detail page on Zillow.com, which put the property’s value at less than half of the listing price: $3.7 million (Zestimate) vs. $7.8 million (list price).

The suit claimed Zillow was restraining competition between real estate brokers by making deals with certain brokerages to hide Zestimates on the brokerages’ for-sale listings by putting the Zestimate under the Zestimate details section of the listing page and not directly under the list price. At the end of February, a New Jersey District Court judge dismissed the lawsuit without prejudice, giving the plaintiff 30 days to resubmit the complaint.

On March 29, attorneys for EJ MGT amended the complaint.

“The Zestimate Agreements between Zillow and certain co-conspirator brokers of residential real estate … restrain trade and deprive Plaintiff and the public in general of the benefits of open and robust competition in the market for residential real estate listing services,” they wrote in the amended complaint.

“The selective concealment of Zestimates … distorts the flow of critical information in the marketplace. The Zestimate Agreements allow Zillow’s favored group of Co-Conspirator Brokers — but no other brokers, agents, or sellers — to suppress critical price information on their listings,” they added.

The complaint alleges Zillow has entered into agreements with these brokerages to conceal Zestimates on their listings:

  • Sotheby’s International Realty, Inc.
  • Coldwell Banker Real Estate LLC
  • Century 21 Real Estate LLC
  • The Corcoran Group ERA
  • Weichert Realty

All except Weichert are Realogy brands. None of the brokerages are included as defendants in the suit. EJ MGT’s brokerage was a Keller Williams franchisee.

In an emailed statement, a Zillow Group spokesperson told Inman, “The claims in this suit are without merit, and we intend to vigorously defend ourselves. The Zestimate has proven itself to be a sought-after free tool for consumers, and that’s why we include it on millions of home details pages on our site, whether they are on or off the market.”

EJ MGT’s attorneys concede that Zillow changed its Zestimate display “in certain ways” after the original complaint was filed. For instance, now if a Zestimate is lower than the list price for a property, it will not appear under the list price, but instead Zillow will display a “View Zestimate” link, the complaint said. Zillow also now includes a graphic and a text next to some listings stating, “The list price and Zestimate for this home are very different, so we might be missing something.”

Nonetheless, the complaint said, “Still, the listing for co-conspirator brokers remained unchanged as to the display of Zestimates and the Zestimate Agreements remain in effect.” The complaint seeks a jury trial and asks for compensatory and punitive damages.

The home at issue in the complaint is currently not for sale and is being rented out. Its current Zestimate has crept up to $5.4 million.

Zillow

The complaint alleges:

Each Defendant’s actions restrains and harms competition by:

a. Harming the competitive process and disrupting the proper functioning of the price-setting mechanism and information exchange of a free market;

b. Insulating brokers (and their agents) that are party to the Zestimate Agreements from competition from rival sellers that would otherwise fairly compete for listings;

c. Causing increased prices in the form of advertising fees, brokers’ commissions, or other costs incurred solely to alter or conceal the display of Zestimates;

d. Selectively depriving consumers of access to price information as displayed in the Zestimate; and

e. Imposing additional barriers to entry in the listing and sale of residential real estate.

 

“In essence, Zillow selectively gives its favored Co-Conspirator Brokers a powerful competitive advantage over their rivals. Zillow’s powerful position as the undisputed leader in online real-estate information is allowing it to pick and choose winners in related markets,” the complaint said.

Attorneys for EJ MGT alleged homeowners are “forced” to pick between hiring one of the “co-conspirator” brokers and having “virtually no control over a critical piece of price-related information that can and does affect home buyers’ decision-making,” rather than being able to choose a brokerage “purely on the merits.”

“Unaffiliated Brokers and Agents, as well as individual home-owners, are left virtually powerless to affect the prominence and salience of Zestimates, regardless of whether the relevant Zestimate is unfavorable, inaccurate or otherwise misleading,” the complaint said.

EJ MGT’s attorneys also alleged buyers are being deprived of a fully competitive marketplace because they’re making their purchase decisions “based on incomplete and selectively distorted information.”

According to the complaint, Zillow’s agreements with select brokerages violate the Sherman Antitrust Act and the New Jersey Antitrust Act and should therefore be prohibited.

“Defendants’ actions unlawfully increase transaction costs and prices, reduce output, harm the competitive process, raise barriers to entry and expansion, and stifle innovation. Defendants’ actions also facilitate Zillow’s ability to maintain and further entrench its dominance in the market for online real-estate information,” the complaint said.

Inman reached out to EJ MGT attorney Edward Grossi of Javerbaum Wurgaft Hicks Kahn Wikstrom & Sinins, P.C. to ask whether the complaint addressed the court’s concerns upon the case’s previous dismissal.

Grossi declined to comment for this story.

Email Andrea V. Brambila.

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