Zillow Wins First Battle in Legal Tussle Against Discount Brokerage

American portal giant Zillow has won the first part of its legal battle against discount brokerage firm REX after a judge decreed that REX's complaints did not warrant a preliminary injunction. According to US agency publication inman.com, the court filings also include the judge's request for REX to stop referring to Zillow and the National Association of Realtors as a 'cartel' in their submissions.

After Wednesday's ruling, REX's CEO Jack Ryan released a statement saying that his company was “disappointed that consumers will continue to face the NAR segregation rule every time they visit Zillow” while a Zillow spokesman told inman.com "We’ve consistently maintained REX’s allegations are without merit... We are pleased with the court’s decision denying REX’s motion for a preliminary injunction".

Background on a potentially damaging case with big repercussions

• September 2020: Zillow announces some back end changes to how its portal system ingests listings feeds. Instead of taking feeds from thousands of MLSs around the country, the portal company switched to using the IDX feeds which come with their own set of rules. One of those rules is that if listings come from a brokerage that is not an NAR member then those listings must be displayed separately on any site using the feed to ingest listings.
•  March 2021: Austin, TX-based discount brokerage REX announces a lawsuit against Zillow and the NAR in which the company claims that Zillow is hindering fair competition by adhering to the NAR's rules around IDX feeds. Essentially the argument centres on the fact that as REX is not an NAR member, its listings are now on what the company calls "a recessed, obscured, and deceptive tab that consumers do not see" on Zillow instead of with the rest of the listings on results pages, something that REX alleges that Zillow and NAR colluded on.
• March 2021: REX turns to scholarly research in its PR battle in the run-up to the court case. Penned by a federal employee working out of the prestigious Berkeley University, the research argued that the MLS system and the NAR perpetuate a property market in which the consumer overpays for realtor services. Having at least partially funded the research, REX used quotes from it to release a statement to the press outlining their case against Zillow and NAR.
• April 2021: Zillow fires back in the press, saying that REX’s “desire for its listings to be located on a different tab does not make Zillow’s actions a conspiracy or boycott".

Apart from potentially having financial repercussions for the defendants, the case is significant not only for Zillow, NAR and REX but for all property marketplace sites using IDX feeds (Realtor.com, Redfin) and potentially for the real estate ecosystem.

If the judge had granted REX's request for a preliminary injunction, Zillow and all other sites using NAR regulated IDX feeds would have been forced to include REX's listings in their main listings pages and not on a separate tab, giving an important boost to REX's business which charges far lower commissions that the traditional 6%. Such a move could well have been a catalyst for other discount brokerages to enter and disrupt the market.

With the preliminary injunction avoided, Zillow and other online real estate marketplace sites will not have to alter the way they display listings for now despite Ryan's assertion that his company's pursuit of the matter is "far from done".