Realogy, the nation’s largest real estate holding company, filed a lawsuit Wednesday in the Supreme Court of New York against the well-funded upstart real estate brokerage Compass over “unfair business practices and illegal schemes to gain market share at all costs.”
Compass has publicly stated its goal to gain 20 percent of market share in the top 20 markets by 2020, and Realogy alleges, “to reach its desired ends, Compass steals from, tortiously interferes with, and disparages its competitors.”
Specifically, Realogy points to what it says are compensation packages to competitor’s employees and agents that are so inflated that Compass is sure to operate at a loss.
Realogy, in the complaint, also alleges that it believes once Compass achieves sufficiently dominant market share it will raise commission splits and fees in favor of the company, as well as restrain trade by collusive actions.
“In fact, just before filing this lawsuit, Compass co-founder and CEO Robert Reffkin personally solicited Realogy to enter into an illegal price-fixing agreement where the two companies would agree to limit agent compensation and “‘compete on brand,’ but not on price,” the complaint reads. “Realogy declined.”
“At Compass we focus on providing the best possible experience for our employees, agents and their clients,” a spokesperson for Compass said in a statement to Inman. “Instead of building a better future for the real estate industry, our competitors are using the court system to stifle competition, but these efforts have been unsuccessful. Compass will continue on its mission to meaningfully improve the real estate industry and help everyone find their place in the world.”
Compass did not immediately respond to a request for comment on the specific price-fixing allegations levied against Reffkin.
Compass is no stranger to lawsuits from competitors. It’s previously been sued by Zephyr Real Estate and Modern Spaces over its agent recruitment practices and Realogy previously sued a former manager who defected to Compass. Zillow also sued the company recently over poached employees but a Compass source told Inman that the lawsuit will be dismissed today, coincidentally.
A Zillow source told Inman that the company believes the resolution reached was a good thing and it’s happy with the result, but declined to reveal the terms of the agreement.
“The overwhelming number of lawsuits that have been filed by competitors across the country, all alleging similar patterns of misconduct, speak to Compass’s intentional disregard for open and fair competition,” the complaint reads. “Compass is trying to avoid the cost and risk of competing fairly.”
In the complaint, Realogy alleges that Compass seeks to attract talented people from Realogy not simply because of their skills, but also to induce them to provide confidential and proprietary information.
“Compass then uses that illicitly obtained confidential information to recruit Realogy-affiliated agents,” the complaint reads. “Compass instructs and encourages its recruits to interfere directly with Plaintiffs’ existing contracts and with other business relationships by inducing Plaintiffs’ employees to breach their non-solicitation and non-compete agreements while promising to indemnify employees if and when they are sued.”
Realogy also accuses Compass employees of accessing without authorization, the Listing Exchange Apartment Rentals maintained by some NRT brokerages. The system allows authorized users to post and view confidential information about individual listings, landlords or sellers, rental history, and neighborhoods.
Based on an analysis of automatically maintained records of log-in attempts, Realogy believes that computers bearing an IP address linked to Compass make unauthorized incursions into the system
Realogy is seeking actual and compensatory damages in an amount to be determined at trial; consequential damages in an amount to be determined at trial; punitive damages in an amount to be determined at trial; injunctive relief as the Court deems necessary; disgorgement of profits received by Defendants through acts of unfair competition; pre-judgment interest at the applicable statutory rate; all reasonable costs and attorneys’ fees and such other and further relief that this Court may deem just and equitable under the facts and circumstances, according to the complaint.
“Open and honest competition is part and parcel of our business,” a spokesperson for Realogy said in a statement. “We face it every day in markets all around the country. And integrity is the bedrock of our industry.”
“But when a competitor jeopardizes that integrity with illegal and unfair actions, we take it very seriously, the spokesperson added. “Our decision to fight for a level playing field is an extension of our commitment to compete vigorously – but ethically – across our brands and businesses. We are confident we will prevail.”
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