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A federal court has found that real estate giant Zillow falsely labeled listings from REX Real Estate on its website, notching the discount brokerage a win before the legal battle between the two companies heads to trial.
On Friday, Judge Thomas S. Zilly of the U.S. District Court for the Western District of Washington concluded that Zillow’s “Agent listings” and “Other listings” tabs on its website are “literally false” and that by putting REX’s listings under “Other listings,” Zillow “falsely stated … that REX was not (or did not employ) an agent.”
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“When the labels are viewed side-by-side, the unambiguous assertion is that one tab includes homes listed for sale by agents and the second tab contains all other listings, i.e., homes for sale by their owners or by non-agents,” Zilly wrote in the Aug. 18 order.
Zillow contends that it deployed the two tabs in order to comply with the National Association of Realtors’ “No-Commingling Rule,” which is optional and 79 percent of Realtor-affiliated multiple listing services (MLSs) have adopted. If adopted, the rule requires recipients of an MLS’s Internet Data Exchange (IDX) listing feed to display MLS-derived listings separately from listings received from other sources. Zillow’s website switched over to IDX at the beginning of 2021.
“When the two-tab system was activated in January 2021, REX employed in various states, including Washington, licensed brokers and agents,” Zilly wrote.
“Thus, REX’s listings qualified as ‘agent listings,’ as opposed to for-sale-by-owner (‘FSBO’) or non-agent listings. Nevertheless, REX’s for-sale listings were relegated, along with FSBO and non-MLS listings, to the ‘Other listings’ page because REX’s brokers and agents were not members of the MLSs from which Zillow was receiving IDX feeds.”
Furthermore, Zilly noted that an FAQ page on Zillow’s website did not explain that the “Other listings” tab could include homes for sale by agents or brokers who were not MLS subscribers, did not define the term “MLS” and did not point out that some licensed real estate agents and brokers don’t belong to an MLS.
In March 2022, REX filed suit against Zillow and NAR saying Zillow’s decision to split listings between “Agent listings” and “Other listings” tabs in order to comply with the No-Commingling Rule dramatically decreased the number of views for REX’s listings on Zillow and lowered sales. Furthermore, REX said the decision negatively impacts consumers, especially sellers who end up “[listing] the home for more days on market and accept lower sales prices” because buyers aren’t searching the “Other listings” tab.
The case is currently scheduled for a two-week trial starting Sept. 18. Last Wednesday, Zilly dismissed all antitrust allegations made by REX against Zillow and NAR, removing the latter as a defendant in the case. He dismissed the claims with prejudice, meaning permanently, unless REX decides to appeal the order.
In a separate order on Aug. 4, Zilly allowed three of REX’s claims against Zillow to survive: A false-advertising claim under the Lanham Act, a claim for unfair or deceptive trade practices under Washington’s Consumer Protection Act (CPA) and a claim alleging defamation. Friday’s order relates to REX’s false-advertising claim under the Lanham Act.
Despite the order, Zillow is confident that a jury will side with its arguments on the remaining claims.
“Last week’s antitrust ruling showed that REX’s primary claim was without merit,” Zillow spokesperson Will Lemke told Inman in an emailed statement.
“This victory was a big step towards us prevailing in this case given their main argument has been tossed. We look forward to presenting our case in court on these remaining claims. We believe customers understand the two-tab system and are confident that the evidence will show that REX’s business failed for reasons unrelated to Zillow.”
While Zilly noted that REX’s listings did experience a decline in views from Zillow users after the two-tab system went live, which Zillow had predicted, he offered no opinion of this fact’s impact on REX’s business model.
“Whether this reduction in views and/or the demise of REX’s business was proximately caused by Zillow’s implementation of the two-tab design is not an issue raised by REX’s motion for partial summary judgment, and this factual question must await trial,” Zilly wrote.
Inman has reached out to REX for comment and will update this story if and when a response is received.
