DOJ says REX deserves a do-over in Zillow/NAR case

Department of Justice seal and a courthouse exterior
Illustration by Lanette Behiry/Real Estate News; Shutterstock

Can NAR’s optional rules still add up to anticompetitive behavior? Yes, the Department of Justice says in a brief filed June 20 in the case of REX vs. Zillow.

June 21, 2024

The Department of Justice, in a new filing, says the “optional nature” of NAR’s no-commingling rule is not enough to prevent anticompetitive behavior — and legal peril.

In denying a new trial of the case between The Real Estate Exchange (REX) and Zillow earlier this year, the judge took an “incomplete approach that creates risk that associations like NAR could evade antitrust scrutiny with optional rules,” the DOJ argued.

The non-binding but important amicus curiae brief filed by the DOJ on June 20 recommended that the Ninth Circuit U.S. Court of Appeals nullify the previous ruling in favor of Zillow and the National Association of Realtors, and send the case back to District Court for reconsideration. If the courts agree, REX could potentially win its bid for a new trial.

What the REX lawsuit is about: This case is, at its core, a dispute about NAR’s “no-commingling” rule, which prohibits real estate sites that use IDX feeds from displaying MLS listings alongside non-MLS listings, such as for-sale-by-owner properties and listings from agents or brokers who don’t subscribe to an MLS. 

REX fell into that category: The discount brokerage bypassed the MLS, choosing instead to promote its listings on Zillow and in social media and search. The company has not been operational since May 2022 but hopes to restart when the time is right, co-founder Lynley Sides recently told Real Estate News.

To maintain its access to vital IDX data, Zillow moved its non-MLS listings — including listings from REX — to a separate tab, reducing traffic to those listings, which REX claimed was an unreasonable restraint of trade. “Although Zillow disliked the rule, Zillow felt compelled to follow it to obtain the benefits of MLS membership,” the brief stated.

The bigger picture: This case is also about commissions and MLSs’ role in maintaining them, the DOJ indicates in its filing. “To keep commissions low, REX attempted to bypass listing properties on MLSs to avoid mandatory buyer-broker or agent commissions that NAR required for its affiliated MLSs,” the brief states.

The DOJ brief also highlights NAR’s power, arguing that even when a rule is optional, it can lead to “concerted action” that adds up to anticompetitive behavior. The lower court ruled differently, but the DOJ says it should reconsider whether there is evidence of a coordinated effort (a “common scheme”) to limit competition from non-MLS listings.

How we got here: REX sued Zillow (and NAR), but failed to sway a Seattle jury in 2023, prompting the brokerage to request a new trial. In January, U.S. District Court judge Thomas Zilly denied that request. The judge had previously ruled that the antitrust claims were without merit, effectively removing NAR as a party to the case.

The DOJ, which has “a significant interest in preventing anticompetitive conduct in the real estate industry,” weighed in with this new brief, which is “in support of neither party.”

Real Estate News has reached out to Zillow and NAR for comment.

What’s next: The Appeals Court will decide whether or not the REX case has reached the end of the road.

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