Zillow Wins 30-Month Lawsuit Against Real Estate Exchange

A jury has determined that Zillow did not make deceptive changes to the way it displays listings after a two-and-a-half-year courtroom battle with Real Estate Exchange (REX).

REX, a low-commission brokerage, filed suit in March 2021 alleging that Zillow (and the National Association of Realtors, NAR) was unfairly concealing non-MLS listings from its portal search results, a strategy REX claims contributed to the brokerage folding in 2022.

The crux of the lawsuit is Zillow's decision to send For-Sale-By-Owner (and therefore non-MLS) listings to a less prominent tab with less traffic constituted an unfair and deceptive practice, which limited the opportunity for brokerages like REX to attract interested buyers and therefore earn commissions.

Zillow did indeed modify its site in January 2021, when it began using the Internet Data Exchange (IDX) feed that handles MLS listings. However, Zillow argued, successfully, that the changes it made were done specifically to comply with NAR guidelines regarding its 'co-mingling' policy.

And last week, on September 29, a trial jury sided with Zillow in a verdict that hammered a final nail in the coffin for REX after 30 months of back-and-forth rulings, from forcing Zillow to hand over sensitive FSBO data to REX's antitrust claims being thrown out with prejudice.

Will Lemke, corporate communications manager at Zillow, said:

"We’re pleased with today’s victory and are ready to move on and focus on what matters: helping customers who come to Zillow get into their next home."

Timeline of REX vs Zillow / NAR lawsuit

January 2021 - Zillow switches from ingesting its listings using many feeds from individual MLSs to using a so-called 'IDX feed'. The IDX feed is a privilege that Zillow has access to thanks to its status as a paid-up brokerage member of MLSs and the National Association of Realtors (NAR).

While the switch to an IDX feed helped Zillow's back-end processes become more efficient it also came with a set of rules that the portal was obliged to adhere to. Sites like Zillow that use the IDX feed must display members' listings separate from non-members' listings.

March 2021 - Fresh from winning an antitrust case targeting its Zestimate tool, Zillow's lawyers are back at work to defend against a suit brought against the portal and the NAR.

The suit comes from Austin, TX-based discount brokerage REX which claims that Zillow's new policy around listing display is stifling competition, preventing home-hunters from seeing all available listings and ultimately driving customers away from REX.

Because REX does not have an MLS membership, its listings are displayed on Zillow's 'other' tab along with FSBO listings. A state of affairs that REX argues led to decreased traffic from the portal and a negative impact on the discount brokerage's bottom line.

March 2021 - New scholarly research recently penned by a federal employee and published in the prestigious UC Berkeley Business Law Journal uses some strong language in claiming that the American real estate game is rigged to favour those traditional brokerages that charge 6% commission.

The American MLS system along with the NAR itself take most of the blame in the paper for the anti-competitive state of the industry. The report, which was partially funded by REX, uses some emphatic language in claiming that...

"The problem for those entrants is that the residential real estate industry is structured to require peer cooperation to complete transactions. Thus, innovative entrants offering to compete on price have been stymied by traditional real estate brokers acting as an informal cartel."

June 2021 - REX is ordered to stop referring to Zillow and NAR as a 'cartel' as a judge decreed that the case does not warrant a preliminary injunction which would have essentially handed a victory to REX and forced Zillow to put the brokerage's listings on the main listings tab on its portal.

February 2022 - NAR issues a counterclaim against REX. The complaint alleges that the discount brokerage's claims ultimately "confuse[d] and misle[d] customers into believing that sellers who list their homes for sale with REX do not pay buyer-agent commissions"

May 2022 - REX acquires the services of noted lawyer David Boies despite having seemingly been forced out of business.

The discount brokerage was forced to join MLSs back in October contrary to its core beliefs and value proposition for home sellers, a decision which, along with hefty legal fees, ultimately left the discount brokerage in a tough position.

August 2022 - Zillow asks the judge to allow its lawyers access to laptops kept as severance by former REX employees. The portal claims that former employees may have wiped data from those laptops that might be used as evidence in the trial.

The motion is ultimately granted by the court despite REX's protests. REX's lawyers reply by asking for access to data around Zillow's FSBO listings.

September 2022 - Zillow reaches out to REX to invite the now-defunct brokerage to join forces in challenging the NAR's controversial 'no commingling rule'. Basically, Zillow is now openly saying that when it switched to an IDX feed in 2021 that it did so only to comply with the an NAR rule that it is not in favour of. Zillow's Senior Director of Broker Operations Matt Hendricks said:

“Zillow strongly supports updating policies like these because they empower consumers and provide a more accessible, transparent picture of what is on the market, helping them make better-informed real estate decisions.”

October 2022 - Zillow is ordered to hand over its FSBO data so that REX can build a case supporting its claim that Zillow's practices contributed to REX's demise.

August 2023 - REX's antitrust claims are dismissed with prejudice, meaning they cannot resubmit the lawsuit in the future. The decision asserted that Zillow and NAR did not conspire to hide listings, effectively giving NAR a "you're free to go" reprieve from the courts.

September 2023 - Zillow wins the case after a trial jury finds that the portal's practices regarding non-MLS listings are fine, while REX failed to prove that Zillow used false advertising before advertising listings elsewhere on its portal.