Compass CEO: Zillow, NAR, MLSs ‘profit from the work of others’ 

Editor's note: Real Estate News is following the preliminary injunction hearing in Compass v. Zillow this week. Read our top takeaways from witness testimony and more.

The leaders of Compass and Zillow testified in New York this week at a preliminary injunction hearing to determine whether Zillow can continue to block certain Compass listings on its website — the subject of a lawsuit Compass filed in June. 

Compass CEO Robert Reffkin was the first executive to take the stand. His testimony covered a lot of ground, but an overarching theme was "us vs. them": Compass and its agents are being bullied by Zillow and disempowered by NAR and MLSs, he argued.

Agents, Compass — and the industry working against them

The givers and the takers: Reffkin set an antagonistic tone early on, dividing the industry into two groups: "those that do the work" (real estate agents) and "those that profit from the work of others" (portals, associations and MLSs). 

And Compass, he said, was in the "workers" camp: "Compass gives more listings to Zillow in the majority of our major markets than any other brokerage firm because we're the biggest brokerage firm. Zillow gives no listings to us. … They don't give at all, but they benefit."

Undisclosed payments: Another way Zillow benefits? By profiting off unwary home shoppers, Reffkin claimed. "When people click 'contact agent' or 'schedule tour,' it gets sent to a third-party agent where Zillow charges thousands of dollars," he alleged. "And so that button is the most expensive click in real estate and the buyer doesn't know."

NAR and MLSs, industry heavies: While Compass' lawsuit is centered around Zillow's listing restrictions, organized real estate, according to Reffkin, also limits agent choice.  

On NAR: "They have a lot of mandatory rules that force agents how to operate and run their business." And MLSs? "They have a real monopoly, meaning 100% of agents have to be members, because you can't do your job if you can't access these listings, [and MLSs] have 100% of them." 

Private listings and three-phased marketing

Reffkin provided extensive testimony about the company's three-phased marketing (3PM) strategy, which he described as "critical to our future."

Private doesn't actually mean private: When asked about the three phases of 3PM, Reffkin said phase one was a private exclusive, but he went on to note: "That's the term. It's just a branded term. It is not private. It is not hidden." 

So why call it "private"? Because "people like the term," Reffkin said. "It helps agents make you feel special as sellers that you have a private listing."

He also explained that "all buyers and agents" can access these private listings by calling or coming into a Compass office, and they don't have to work with a Compass agent.

The 'Zillow ban': Getting to the core of the lawsuit, Reffkin referenced Zillow's "ban" on 3PM listings more than two dozen times during his testimony. Compass agents — including Reffkin's  mom, he noted — are now "terrified, absolutely terrified" to suggest the 3PM strategy. "The agents are being intimidated, the agents are being bullied, the agents are fearful to give [sellers that choice] because they're — if they market a home on Zillow — then they're banned," he claimed.

And it's not just agents: "Every major broker I know, Zillow met with them and told them, if the private listings exist on a search, if they share how many there are or how to find them, they'll be banned. And so if I were these brokerages, I think they're scared to be banned."

Kept in the dark about Zillow's listing standards: When Zillow announced its new Listing Access Standards (LAS) on April 10, Reffkin said he initially thought "it was going to be a good thing." The press release, he explained, said the portal was "going to implement their version of Clear Cooperation on Zillow" — a policy NAR had recently updated to offer "expanded choice for sellers." 

But Zillow, Reffkin claimed, "didn't actually give us the details [of the standards] until months later."

'Unquantifiable' harm: Compass' attorney wrapped up his examination by asking Reffkin how the company had been harmed. "We would have grown much more if there was no Zillow ban," because adoption of the company's 3PM strategy slowed after the policy was announced, Reffkin claimed. 

Reffkin also mentioned Compass' plan to install billboards promoting 3PM — a plan the company abandoned after the LAS announcement, resulting in lost growth opportunities, according to the CEO. 

"I can't imagine how many buyers or how much more traffic we would have if this billboard was in every market in the country over the last eight months. … How many more agents would we have had? How many more sellers would we have had? It's unquantifiable."

Cross examination: Pressed on harm, clarity around listing rules

Reffkin described his company as both "a brokerage firm and an online search portal" during his testimony, something Zillow attorney Bonnie Lau dug into as she began her cross-examination. She also questioned Reffkin on his understanding of Zillow's listing standards and what guidance Compass received.

An 'online search portal' without search data? When asked about online search and web traffic, Reffkin said he didn't know Compass' market share in online search, how it measures market share, or whether it tracks visitors to other portals, such as Zillow, Redfin and Homes.com. 

Lau then asked Reffkin to confirm the accuracy of a statement from Compass' Deputy General Counsel Timothea Letson that said, "Compass did not forecast potential earnings or future traffic to its home search platform that would flow from 3PS."

Reffkin's response? "I don't know what 3PS is." He did not, however, dispute the statement.

Lau also questioned the financial harm to Compass given the company's record third-quarter earnings, which covered the three-month period after Zillow began enforcing its private listings ban.

Unclear standards? Lau pressed Reffkin on his claim that Zillow didn't explain its new standards for months, referencing his deposition in September. Reffkin testified at the time that, during an April 14 conversation, Zillow said Compass' "black box" — a section of Compass' website promoting its private exclusives — violated Zillow's listings standards. 

Lau also presented an email chain between Zillow and Ashton Alexander, SVP of strategy and business operations at Compass, that Reffkin was cc'ed on. In the email — sent on April 15, five days after Zillow announced its new standards — Alexander wrote, "[Zillow] takes issue with black box." 

Still, Reffkin insisted he had "no reason to believe that there were access standards at this time. This is just a conversation between two people. When I read 'takes issue,' 'takes issue' does not mean there are standards that you cannot do something."