By Zillow’s account, a handful of large multiple listing services are doing the bidding of the nation’s largest brokerage.
That’s according to a lawsuit filed Tuesday by the nation’s largest real estate search platform, along with the company’s Chief Industry Development Officer Errol Samuelson.
As of the lawsuit’s filing on Tuesday, three MLSs had secured a direct listing feed from Compass International Holdings, made a key rule change and announced that they would accept subscribers from anywhere in the country.
By Wednesday, BrightMLS, one of the nation’s largest MLSs by subscriber count, became the fourth.
After its nationwide expansion, MRED began threatening to cut Zillow’s access to the listings that power the portal. The issue stemmed from Compass listings in California, Florida and Georgia that Zillow blocked for violating the portal’s rules.
While Zillow has backup data feeds in place with some brokerages, the growing wave of MLSs making rule changes related to listing display poses a growing threat to Zillow’s business model.
Samuelson spoke with Inman exclusively on Tuesday to provide context behind the trend and Zillow’s request for a federal court to stop it. The interview below has been edited for length and clarity.
Inman: This lawsuit and some of the details in the complaint help put into perspective the announcements by MRED and Realtracs. Are they expanding their reach and rewriting their rules so that Zillow can’t enforce the Listing Access Standards?
Errol Samuelson: An MLS is supposed to be a marketplace, a cooperative, where brokers in the market can share their listings, which gives their sellers the greatest exposure, and buyers and brokers representing buyers can see everything that’s available. It’s the envy of the world, the system we have in North America, because it’s liquid, it’s transparent and it’s fair.
The problem here is that MRED is essentially conspiring with their biggest market share player — a market share player who has seats on their board of managers — to create rules to benefit that one broker. They’re breaking that principle of neutrality.
Inman: And by doing so, MRED has prevented Zillow from enforcing its rules in Chicagoland?
Samuelson: We’ve essentially been following those rules in the entire country, with the exception of Chicago. And the reason not in Chicago is that Chicago changed their rules in October and modified their rules that accompany listing feeds. They told us that if we were to implement our rules in Chicago, they would cut our feed.
This coincidentally was just days after [Compass CEO] Robert Reffkin sent a note to the eight largest MLSs in the country, including Chicago, saying that if Zillow implements their listing access standards, you should cut their feeds. And then, lo and behold, MRED does what Compass wants.
Inman: Is Realtracs doing the same thing — have they changed their rules in the same way that MRED has, so that the stage is set?
Samuelson: Realtracs in Nashville has announced a rule change that has not gone into effect yet. But essentially, that rule change, while written slightly differently, has the same effect as what MRED has done.
Realtracs is saying that beginning next month, if we were to implement or continue implementing our Listing Access Standards, they would cut our feed. And not coincidentally, when they announced the rule changes, they also announced that they were going to open up their MLS nationwide. It’s the same playbook as MRED. And then Compass announced that they were the launch partner — or one of the launch partners — for this nationwide expansion. The same playbook as in Chicago.
Inman: Do you expect more MLSs to follow suit? [Note: BrightMLS followed suit a day after this interview.]
Samuelson: We know that in Los Angeles — the LA area MLS is known as CLAW, it basically covers Beverly Hills, Brentwood and some of the nicer neighborhoods there — they also made a rule change, and they also announced that they were going to open up their MLS nationally. Compass is encouraging its agents to join that MLS. I’m not sure what’s going to happen in LA — it’s still early days — but the playbook seems to look the same in MRED, Realtracs in Nashville and CLAW in Los Angeles.
Inman: Right now, it’s 28 percent of listings in Chicago that Zillow presumably can’t afford to lose. Now we’re looking at markets kind of everywhere — nationwide. If you don’t succeed in this lawsuit, then what?
Samuelson: First of all, I think we will succeed in this lawsuit because the behavior has been so egregious. But here’s the point: When you have the biggest brokerage in the country — which continues to grow its share by acquiring other brokerages — conspiring with a monopoly, and MRED is clearly a monopoly with 98 percent of listings in Chicago, to target a broker member — us — or to assist your largest broker in competing with other brokers in that market — that’s a problem. It’s anti-competitive. It harms not only consumers; it harms other brokers who are members of MRED in that market.
Inman: We talked about how you have direct listing agreements, and that’s really what’s at stake right now with MRED. They’ve been threatening recently — don’t suppress listings, don’t enforce your standards in Boca Raton and Georgia or California, or else you lose your feed.
Samuelson: You’re a monopoly in Chicago — what do you care if we have a Listing Access Standard in California? Unless you are working in conjunction with Compass in supporting their plan. There’s no direct benefit for MRED to threaten us over listings in LA, but there’s certainly a benefit for Compass. That’s pretty clear.
If you’re an agent in Los Angeles, you need access to all the listings in Los Angeles. You can go join MRED, [and] you might see the Compass listings there — you’re still missing the rest of the market. So if you’re an agent in LA, I don’t legitimately see you quitting your local California MLS to go join MRED because now you don’t see all the other California listings. This notion of somehow becoming a dominant force in San Francisco or Houston or something doesn’t really make sense to me.
Inman: This is playing out in tandem with Compass defending its 3-Phased Marketing Strategy.
Samuelson: We do think that phase one — where they force a buyer to work with Compass to get access to listings — is bad for the buyer. We think it’s actually bad for the seller who otherwise doesn’t have legitimate privacy concerns about keeping their listing off the MLS.
Having said that, they’re welcome to think that’s the way they wish to operate their business. All we’ve ever said is we simply will not show those listings. They can put those listings on Realtor.com and Redfin, put them on billboards. We’re just saying that we think that’s anti-consumer and therefore we’re going to choose not to show those listings.
It’s good for Compass. They can recruit agents, they can recruit buyers, and they can double-end the deals. With the caveat that it’s worse for sellers and it’s bad for buyers.
This is where — again, at the start, I was saying what’s been so great about North American real estate is because it’s been transparent, because it’s been cooperative. It’s a very, very pro-consumer system.
And once you get big players starting to hide inventory for their own purposes and their own benefits, you lose that pro-consumer marketplace, and you get the situation you get overseas, where, as a buyer, I have to go to seven different companies to see what’s on the market. And if I want to buy one of those properties, I’m forced to work with that company. And I can’t even negotiate my commission on the buy side — you’re going to pay the cover charge to get into the club.
Inman: The stakes seem high.
Samuelson: There are plenty of well-run, functioning MLSs around the country that are a transparent marketplace, that are neutral — the vast majority, actually. You and I only came up with a list of three. Now, MRED is really, really big, and the other two are big-ish. The rest of the MLSs are actually functioning pretty well.
I think where the stakes are high is when it comes to the underlying principles. And I do think that as an industry, we need to fight for the principles of transparency and cooperation, because that is what’s being questioned right now.