Zillow poised for legal fight as agent antitrust case advances 

Zillow must face antitrust claims alleging the company pressures real estate agents to steer clients to its mortgage lending services, a federal court ruled on Monday.

What the court decided: On Sept. 28, Judge James L. Robart of the U.S. District Court for the Western District of Washington — Zillow's home turf — denied the home search giant's motion to dismiss a case filed in January by Stephanie Dupuis, a Washington state agent who owns a real estate team in Kitsap County, on behalf of all U.S. residents who, between Jan. 16, 2022, and the date the lawsuit was filed, "are or were enrolled in Zillow Group's Preferred or Flex Agent programs."

At this stage of the case, the plaintiffs, who also include Maryland and Oregon agents, must adequately allege "plausible" claims to survive a motion to dismiss — a threshold the complaint cleared despite Zillow's opposition, which the court found "unpersuasive."

Ignoring 'direct business harms'? Dupuis' Jan. 16 complaint alleged that, in an "abuse of monopoly power," the number and quality of client connections Zillow provides its Preferred (formerly Flex) agents depends on the number of Zillow Home Loans pre-approvals an agent is able to secure. Zillow tracks that metric through its Follow Up Boss system, which Preferred agents are required to purchase and use in an alleged "illegal tying arrangement," and penalizes agents who refuse to steer clients to ZHL, including Dupuis' team, the complaint alleges.

In his ruling, Robart wrote that Zillow's "contention that it is not 'unfair' to expect agents to hit target metrics ignores the direct business harms detailed in the complaint."

"Plaintiffs explicitly allege they suffered lost business, reduced lead pipelines, and terminated participation in the Preferred program as direct retaliation for refusing to meet ZHL targets," his ruling said. "These operational penalties constitute a direct injury to business or property that agents could not reasonably avoid while participating in the ecosystem."

A premise that has been 'squarely rejected': Robart indicated that Zillow's argument that the plaintiffs could not be coerced because they were free to leave its ecosystem was flawed.

"The Ninth Circuit has squarely rejected the premise that a defendant may avoid tying liability simply because buyers theoretically possess outside options or could exit the platform altogether," he wrote.

"Because homebuyers overwhelmingly default to Zillow's platform, Plaintiffs plausibly allege that independent agents have no choice but to participate in Zillow's referral ecosystem to access clients," he added.

What Zillow had to say: In an emailed statement, a Zillow spokesperson told Real Estate News that Zillow continues to believe Dupuis' claims are "fundamentally flawed." 

"Buyers on Zillow are always in control of which agent and lender they work with," the spokesperson said. "Zillow gives consumers and agents genuine choice, and nothing alleged in this litigation changes that. We will continue to vigorously defend ourselves."

Similar antitrust case losing steam: In contrast to the Dupuis lawsuit, a similar antitrust case filed last fall against Zillow may be on its last legs.

Robart dismissed the case known as Taylor/Armstrong in July but gave the plaintiffs an opportunity to amend their complaint, which they did in August. Zillow has asked Robart to toss that case for good.