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In a move that may have far-reaching implications, the Department of Justice (DOJ) has weighed in on the legal case between The Real Estate Exchange (REX) and Zillow in a new brief filed on Thursday that takes aim at the National Association of Realtors’ (NAR) optional “no-commingling” rule.
The DOJ’s take on the matter challenges a previous ruling in the case from earlier this year, which denied REX the opportunity of a retrial.
NAR’s “no-commingling” rule requires listing platforms that adopt it to separate MLS listings from non-MLS listings. In REX v. Zillow, discount brokerage REX, which did not operate within an MLS while active, argued that Zillow’s adoption of the “no-commingling” rule limited REX’s visibility on the platform.
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At the core of the DOJ’s new brief is the “no-commingling” rule’s “optional nature,” which the department states does not prevent it from potentially being anticompetitive. The DOJ further argues that the earlier court decision denying REX a retrial did not fully take into consideration that associations like NAR may have circumvented antitrust oversight by enacting such optional rules.
“The judge’s decision created a loophole that could allow associations to sidestep antitrust scrutiny by cloaking restrictive rules as optional,” the DOJ’s filing states. The filing also notes that although NAR states the “no-commingling” rule is optional, those entities that adopt the rule must do so in full since the rule “cannot be modified,” according to the NAR Handbook.
In its brief, the DOJ further argued that Supreme Court precedent has shown optional rules may involve “concerted action” that can make those rules “mandatory in practice.” Such optional rules can also “invite others to participate in a common plan,” which the DOJ stated, is largely where REX’s court argument holds traction — in that the brokerage argued NAR, MLSs and ultimately Zillow acquiesced to and complied with the “no-commingling” rule.
“This Court should vacate the judgment below and remand the case for the district court to fully consider whether there is adequate evidence of concerted action under this [common plan] theory,” the DOJ’s brief reads.
REX sued Zillow after the listing portal changed its model in 2021 by becoming a licensed brokerage in order to gain direct access to MLSs’ Internet Data Exchange feeds.
At that time, Zillow also became a member of NAR and its brokers became members of local MLSs. Since the majority of MLSs that Zillow and its brokers joined had adopted the “no-commingling” rule, Zillow was also required to abide by the rule in the regions where those MLSs were located. In response, Zillow separated its search portal into two tabs, one for “Agent listings” and the other for “Other listings.”
REX’s listings were relegated to the “Other listings” tab as a non-MLS member and the brokerage alleged that page views of its listings on Zillow dropped by as much as 80 percent after the change to Zillow’s website went into effect.
Zillow was also hesitant to adopt the “no-commingling” rule, the DOJ’s brief notes, but was compelled to do so in order to gain access to the MLS data, which shows the weight of the market impact that MLS rules hold.
“While Zillow disagreed with the rule, it complied to maintain access to MLS data,” the DOJ said.
REX has not been operational since May 2022 but has continued in its legal battle. After the firm’s request for a retrial was denied in January, REX filed a motion the following month to appeal the ruling.
The ball is now back in the Ninth Circuit’s court to determine whether or not to remand the case back to the District Court to continue proceedings. This latest statement from the DOJ could be just what REX needs to tip the scales in its favor and continue to fight for what it sees as fair market access when it comes to advertising listings.
View the DOJ’s brief in full here.
