Does Zillow’s policy really restrict Compass’s business?

While the more attention-grabbing parts of Compass’s complaint in its suit against Zillow included late night calls between Robert Reffkin and “co-conspirator” Redfin CEO Glenn Kelman, and a tense meeting with Zillow executives, the complaint also detailed the business impacts Compass is feeling as a result of Zillow’s policy. 

In the complaint, Compass claims that Zillow’s policy “destroys” its ability to use the first two phases of its three-phase marketing plan: private exclusives and coming soon.

“The Zillow Ban seeks to ensure that all home listings in this country are steered on to its dominant search platform so Zillow can monetize each home listing and protect its monopoly,” the complaint states. 

Is it true?

Under the listing standards policy, Zillow is banning any listing not input into the MLS within 24 business hours of the property being publicly marketed. Compass claims that the policy goes even further and bans listings entered into the MLS within 24 hours of public marketing, but not available to be displayed on Zillow or other sites that receive an IDX feeds. This would mean that the ban would impact any listing that is delayed from hitting an IDX feed as a delayed marketing exempt listing under the National Association of Realtors (NAR) new Multiple Listing Options for Sellers (MLOS) Policy.

However, based on Zillow’s FAQs about the policy, listings will only be banned if they are not entered into the MLS within one business day of public marketing. This means, according to Zillow, that “Coming Soon listings entered into the MLS within one business day and made available to all MLS participants and available via IDX or VOW, comply with our standards.”

So, contrary to Compass’s claim that a listing must be available to be shared on Zillow and other IDX feed sites immediately to comply with Zillow’s policy, a listing entered into the MLS that is not yet available for IDX syndication to Zillow’s site, such as a delayed marketing exempt listing, is still in compliance with the policy. 

Compass “can’t leverage internal platform”

Additionally, Compass correctly claims that the policy only allows for office exclusives that are shared in one-to-one communication within the same brokerage. The FAQs for Zillow’s policy states that, while private listings or office exclusives are allowed under the policy, a listing may remain completely private only if four conditions are met, one of which is that the “listing is shared only in one-to-one communication between agents within the same brokerage and shared one-to-one to their individual clients.”

As a result of the policy, Compass says it is unable to leverage its internal database that allows the company’s agents to browse its private exclusive inventory and that it is unable to share that inventory one-to-one with agents at other brokerages. Additionally, Compass claims that the policy jeopardizes all of its private exclusive listings, which it advertises the existence of via general branding on Compass.com. 

“For example, Private Exclusive listings that are referenced in advertisements on Compass.com mentioning the number of Private Exclusive listings available in a city or specific geography, or similarly returned in response to a search result on Compass.com, will trigger the Zillow Ban,” the filing states.

Earlier this month, industry analyst Mike DelPrete estimated that roughly 7,000 Compass private exclusives would be banned from Zillow due to this. 

Is “Zillow Ban” more restrictive than CCP?

“The Zillow Ban is thus far more restrictive than the CCP and will force on to Zillow tens of thousands of listings across brokerages that, today, are being marketed off Zillow by home sellers who are not yet ready to post their listings on Zillow’s platform,” the complaint states.

“The Zillow Ban is designed to make it hard, indeed nearly impossible, for home sellers to sell their home outside of Zillow, in an effort to force all listings to be on Zillow where Zillow makes money selling leads off the homeowners’ listings. The Zillow Ban also makes it difficult, indeed nearly impossible, for Zillow’s home search competitors to carry unique inventory and search results. “

While it is one thing to postulate how this ban may impact Compass in the future, according to the complaint, the policy, which goes into effect next week, has already started hurting Compass financially. 

According to the complaint, Compass agents have reported that clients are asking if their listing will be banned from Zillow if they use the three-phase marketing agreement. Clients whose homes are currently in the Coming Soon phase has reportedly “expressed unease that their listing could be banned from Zillow and have told Compass that they would have to consider switching to an agent at another firm because that would be the only way to get the property unbanned and listed on Zillow.” In 11 out of Compass’s 12 regions, the regional vice presidents reported that they have seen a decrease in three-phase marketing strategy adoption rates since Zillow’s policy was announced. 

Compass agents who spoke with HousingWire said that they are fielding some questions from clients about Zillow’s policy and how it could impact their listings, but they report feeling confident in their ability to answer these questions. 

With Compass demanding a jury trial, it will possibly be up to a jury to decide exactly to what extent Zillow’s policy is impacting Compass’s business.