The Federal Government’s monopolist action against Google earlier this week begs the question, are there any real estate monopolies? The National Association of Realtors? Zillow? Even Google?
I, for one, start every search for real estate with Google. I may land on Zillow, Redfin, or realtor.com, but I begin my property search with Google.
In a 57-page complaint, the U.S. Justice Department charged Google with illegally protecting its monopoly over search and search advertising by locking up deals with giant partners and thwarting competition through exclusive business deals. The consequences: the search giant controls search and search advertising pricing.
Get ready for at least a two- to three-year court battle until this case is resolved.
But what about real estate? Are monopolies lurking in the fragmented swamp of real estate services?
It seems counterintuitive when you consider millions of independent real estate agents deliver services to millions of real estate consumers every year. Monopoly, really?
The general definition of a monopoly is a market structure characterized by a single seller, peddling a unique product in the market. In a monopoly market, the company faces no competition, as it is the sole seller of goods with no close substitute.
But for real estate, fragmentation may not be a powerful enough defense against charges of antitrust claims. For instance, is the underlying MLS database a cabal created by NAR and big real estate firms to engage in monopolist actions to keep commissions arbitrary, confusing and high? A recent class action lawsuit claims the answer is yes.
That lawsuit, filed in 2019 on behalf of homeseller Christopher Moehrl, alleges that the sharing of commissions between the listing and buyer broker — referred to in the suit as the buyer broker commission rules — inflates seller costs and violates the Sherman Antitrust Act.
NAR argues that the lawsuit misrepresents the rules that govern multiple listing services, which “have long been recognized by the courts across the country as protecting consumers and creating competitive, efficient markets.”
Earlier this month, a U.S. District Court judge denied motions by NAR to dismiss the lawsuit.
It’s my guess that this case will drag out for as long as the Google DOJ action, or until NAR feels forced to settle with some new rules around shared listings and broker cooperation.
Another dimension to monopoly charges in the real estate world could be Zillow’s dominance over real estate search, with 200 million-plus consumers searching the site every month. But that alone does not necessarily constitute a monopoly.
Some Zillow critics charged that the search giant would have a monopoly in online real estate search when it acquired Trulia in 2015 for $2.5 billion. But just as the deal was being considered by antitrust regulators, News Corp. acquired Realtor.com. That fended off monopoly claims.
Zillow’s rising power over the past five years cannot be underestimated, but it is not the sole seller of real estate services.
A shift in its business model to iBuying further complicates such charges against Zillow. A nascent market with no clear leader, Zillow is one of many companies offering an instant-offer like service to homesellers.
Today, when I search for real estate, no single national company controls the local market. And I can see almost all of the listings because of a long-standing pact between buyer and seller brokers. That’s a relationship self-regulated by NAR that has defined how property is listed and how real estate commissions have been paid for more than one hundred years.
Am I a victim of antitrust? I don’t see it that way as a consumer, but I am not the final arbiter of heady antitrust claims.
More to come as the courts decide the industry’s future.