Real estate giants Zillow and the National Association of Realtors are attempting to get an antitrust lawsuit filed by REX Real Estate tossed, hitting back against the discount brokerage’s allegations that it is the target of an illegal boycott.

Real estate giants Zillow and the National Association of Realtors are attempting to get an antitrust lawsuit filed by REX Real Estate tossed, hitting back against the discount brokerage’s allegations that it is the target of an illegal boycott.

REX sued Zillow and NAR in March, alleging antitrust violations for a NAR rule that prompted Zillow to segregate non-multiple listing service listings from MLS listings on its website, including listings from REX, which largely operates outside of MLSs because of the firm’s belief that they inflate real estate commissions.

Last month, a federal court ruled against REX’s bid for a preliminary injunction against NAR and Zillow and directed REX to stop referring to them and others as a “cartel,” a term the judge said “is neither persuasive nor remotely accurate.”

In a motion to dismiss the case, Zillow said REX’s basic objection was simply that it doesn’t like how its properties appear on Zillow’s online platforms — a reason that doesn’t give rise to a legal claim.

“In an attempt to force a change, REX has hurled sensational allegations against Zillow, all couched as sprawling antitrust, false advertising, and consumer protection claims,” attorneys for Zillow wrote. “But this is simply an aggressive and disingenuous business and public relations strategy — not the makings of a viable lawsuit. Each of REX’s bald, conclusory, and empty claims fail at the outset. Accordingly, this Court should dismiss REX’s complaint … with prejudice.”

Zillow became entangled in the case thanks to a change in the way it gets its listings. In the past, the company got listings via a patchwork of thousands of separate feeds through agreements with brokerages and MLSs. However, Zillow became a brokerage and switched to an IDX feed in January, which reduced the number of listing feeds coming into the company to around 600 directly from MLSs.

The switch meant that Zillow became bound by local MLS rules regarding display of IDX listings, including an optional NAR rule that some, but not all, Realtor-affiliated MLSs have adopted that requires that IDX listings be displayed separately from listings that come from other sources. To comply with that rule, Zillow chose to put MLS listings under an “Agent Listings” tab on its website and to put non-MLS listings under an “Other Listings” tab.

Some of REX’s listings are co-listed with an MLS member brokerage and those listings appear under the “Agent Listings” tab. But the majority of REX’s listings are not co-listed and therefore appear under the “Other Listings” tab, which REX alleges has resulted in its listings getting less traffic, hurting REX’s reputation, and thwarting its reduced-commission business model.

At this stage in the case, the court does not have to decide whether the plaintiff’s allegations are true, but whether they are plausible. According to Zillow, REX can’t plausibly allege that Zillow was part of an illegal agreement because REX’s own complaint shows that Zillow “simply acquired data for its data aggregation business and agreed to the required terms of use to obtain that data.” That, Zillow said, was “not an agreement to conspire.”

In their motions to dismiss, both NAR and Zillow note that the optional rule at issue, Section 18.3.11 of NAR’s IDX Policy, was developed before Zillow joined NAR, more than a decade ago.

“REX makes no plausible allegation that Zillow created, established, enforced, advocated for, or even influenced the adoption of the No-Commingling Rule, which was adopted before Zillow joined NAR or any MLS,” Zillow said in its filing.

Attorneys for NAR stressed that Zillow changed how it would display listings independently of the trade group, which was not involved in those decisions.

“Section 18.3.11 is optional, and REX has not alleged any facts showing there is an agreement between NAR and the local multiple listing services or between NAR and Zillow to ‘segregate’ REX’s listings on Zillow’s website,” NAR’s motion to dismiss said.

“Indeed, REX has expressly alleged that NAR-affiliated multiple listing services have not agreed to follow Section 18.3.11 and that Zillow’s choice to use the two tabs on its website, nationwide, was its own independent choice.”

In their filings, both NAR and Zillow contend that REX is alleging harm to REX, not competition or consumers.

“REX has not pleaded facts showing direct evidence that publication of its listings on the second tab of Zillow’s website reduced output, increased prices, or decreased quality in the putative market for ‘real estate brokerage services,'” NAR’s motion said. “At best, the injuries alleged in its Complaint are injuries to REX, not harm to consumers.”

In addition, NAR pointed out that consumers still have access to REX’s services.

“REX is still competing in the market and offering its services to whoever wants them,” NAR’s filing said. “Outside of Zillow, REX advertises its listings directly to consumers, including through ‘personalized ads.’ And it still advertises its listings on Zillow, on the first tab of the website, through co-listings, … and on the second tab of Zillow’s website. Thus, from the allegations in the Complaint, it is clear that consumers have not lost access to REX’s allegedly lower-priced commissions.”

Zillow argued that REX’s allegations about harm to competition in general are not plausible.

“To start, the suggestion that lower-commission businesses are blocked from the market does not make sense, when REX concedes that an MLS-affiliated seller can ‘offer any amount of compensation to buyer agents under the NAR rule’ it deems appropriate,” Zillow’s motion said.

“In other words, listings offering a $1 commission can appear in Zillow’s default ‘Agent listings’ tab. Further, the fact that REX’s own properties continue to appear on Zillow … and that REX uses personalized ads to target consumers… undermines REX’s claim that competitors are shut out.

“Notably, REX admits that consumers can ‘see every home listed for sale’ on Zillow by ‘mov[ing] back and forth between … tabs.’ In other words, far from demonstrating harm to competition, REX’s own allegations demonstrate that businesses offering low commissions to real estate agents continue to appear on Zillow and elsewhere.”

Moreover, both NAR and Zillow expressed skepticism that REX has much of an effect on competition.

“REX asserts that its model — which bypasses the MLS — has achieved lower commission rates for its clients: an average of 3.3 percent for REX clients, rather than the national brokerage commission rate of roughly 5.5 percent,” Zillow’s motion said.

“Critically, REX does not say whether its average client is able to sell her home for the same (or a better) price than she would achieve with an MLS agent. Nor does REX say whether its average client’s net proceeds from a home sale beat the market. In other words, while REX alleges that its clients pay lower commissions, it does not say whether its clients make more money from selling their homes through REX.”

It’s not plausible for REX to assume that other brokers in the market can’t both belong to MLSs and and offer consumers lower-than-average commissions, according to NAR’s filing.

“Indeed, according to REX’s own allegations, it is implausible that REX, or the visibility of REX’s listings on Zillow, has any impact on competition or the prices paid by consumers for brokerage services,” NAR’s motion said.

“REX alleges that ‘Americans spend an estimated $100 billion annually just on the commissions for buying and selling homes.’ Yet REX purportedly has saved consumers only ‘$29 million’ in commissions ‘over the past five years.’ That is less than $6 million in purported savings in a $100 billion market, which amounts to less than one-hundredth of a percent of what consumers spend annually on real estate brokerage commissions, according to REX’s own allegations.

“Because REX had little impact on competition in the ‘market as a whole’ before Zillow changed its website, … it stands to reason that the publication of REX’s listings on a second tab of Zillow’s website had no impact on competition at all.”

Asked for comment on the motions to dismiss, a REX spokesperson told Inman in an emailed statement, “We are reviewing and will respond within the deadline set by the court.”

Mantill Williams, NAR’s vice president of communications, told Inman the trade group continues to believe REX’s suit is without merit.

“As explained in our motion to dismiss, and contrary to the plaintiff’s baseless and exaggerated allegations, NAR simply allows local multiple listing services affiliated with NAR to decide whether listings obtained through internet data exchange feeds from Realtor association MLSs where the MLS participant holds participatory rights must be displayed separately from listings obtained from other sources,” he said in an emailed statement.

Mantill Williams

“As we have previously stated, this is an example of a brokerage trying to take benefits of the MLS system without contributing to it. It has been long recognized that the MLS system provides considerable pro-consumer, pro-competition value. REX’s lawsuit seeks to undermine that consumer value — simply for REX’s own benefit.

“This motion follows the reasoning of a recent court decision denying plaintiff’s preliminary injunction, furthering our position that this lawsuit is nothing more than a frivolous attempt to make up for REX’s business shortcomings. Antitrust laws are not meant to serve as a business strategy. Courts have repeatedly held they are there to protect consumers and competition, not competitors.

“The MLS system puts consumers first by enabling equitable access for buyers, sellers and small business brokerages to the most comprehensive and accurate information about homes for sale. We strongly believe this lawsuit has no legal basis and that NAR does not belong in it.”

Zillow declined to comment for this story.

Email Andrea V. Brambila.

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