The controversies surrounding Compass that have swirled all year just got hotter for the world’s largest real estate brokerage.
On Thursday morning, six multiple listing services from across the country filed a federal lawsuit in the Southern District of New York against Compass International Holdings as a preemptive move to stop the mega-brokerage from filing antitrust lawsuits against them for imposing rules on brokers.
The suit — from Arizona Regional MLS, Bridge MLS, Canopy MLS, REcolorado, Hive MLS and Doorify MLS — follows a similar one filed earlier this month in the same court by the California Regional MLS. Other MLS networks are expected to pile onto both lawsuits, sources told Gimme Shelter, including OneKey MLS, the MLS for metropolitan New York, which did not return calls for comment at press time.
On Tuesday, OneKey’s CEO, Richard Haggerty, posted a statement defending its position: “Withholding inventory … [restricts] buy access … potentially limiting a seller’s return on their investment. Consumers deserve the freedom to work with the professional they trust without being limited to one company’s private inventory.”
A Compass network of private listings — meaning listings that are not in public view for house hunters to browse — is at the center of the disputes, which have only grown hotter in recent months.
Critics say the private network interferes with the free, fair and transparent nature of public listing networks and — as per today’s suit — argue that Compass private listings give the brokerage an unfair competitive advantage and undermine the MLS (multiple listings service) system.
For its part, Compass says it gives brokers and sellers “choice” to “test the market” without pesky information like how many days the home has lingered on the market or how many price drops it may have had. Compass also wants its brokers to be able to post their listings on MLS networks without following MLS rules. In a state like California, brokers must post listings within 24 hours of marketing them or face fines.
The heat began increasing in January, when Compass merged with Anywhere Real Estate in a $1.6 billion all-stock deal.
Privately, Compass executives told Gimme they are confident the deal is too big to unwind. But that hasn’t stopped New York Attorney General Letitia James as well as attorneys general in at least two other jurisdictions — the District of Columbia and Tennessee — from investigating Compass for violating antitrust laws.
A Compass spokesperson would not comment on the state attorney general antitrust investigations. As for private listings, the spokesperson said: “Only the law and the homeowner should tell agents how to publicly market a home.”
Compass is also battling Zillow, the country’s largest public real estate and marketing platform. Jeremy Wacksman, CEO of Zillow Group, was not available for comment at press time.
Last year, after Zillow barred listings from its site that had been marketed elsewhere first, Compass filed an antitrust suit in New York. After a federal judge refused to block the rules, which Zillow amended, Compass dropped the case. Compass then partnered with the Chicago MLS, MRED (Midwest Real Estate Data), to make its private listing network national.
In May, Zillow sued them both in Illinois, alleging they conspired to cut off its Chicago listing feed unless it carried Compass’s private listings. After a temporary restraining order restored Zillow’s feed, a judge ruled that Zillow did not make a strong enough case for an injunction and dissolved the order. While the issues at the heart of the battle remain unresolved, both sides were able to claim a victory of sorts.
“The key unresolved issue isn’t really between Zillow and Compass, it’s between Compass and the rest of the real estate industry who want to keep the fair and transparent market that this country has built up over decades,” a Zillow spokesperson told Gimme Shelter. “Compass became the largest real estate brokerage in the country, then leveraged its size to create a business model dependent on gatekeeping access to listings, so they can force consumers into their ecosystem and cut off agents at smaller brokerages from being able to compete.”
Both Zillow and Compass claimed victory last month when a federal judge on the U.S District Court for the Northern District of Illinois denied Zillow’s motion for a preliminary injunction against Compass and MRED. Compass CEO Robert Reffkin called the ruling “a significant win for homeowners and our real estate professionals nationwide,” adding that “homeowners deserve the right to choose how their properties are marketed and no one should be penalizing agents for simply following their client’s lawful instructions. As a company, we will continue to champion pro-competitive, pro-consumer, and innovative services and products that deliver positive outcomes for all our stakeholders.”
While Compass says its private listings are available to non-Compass brokers upon request, rival Brown Harris Stevens CEO Bess Freedman says that access is difficult and has led to Compass allegedly poaching non-Compass clients.
“Why should we have to be a detective to get the information?” she told Gimme. “They are framing it as sellers’ choice. But it’s a manufactured narrative to own the marketplace because sellers already have choice. If they have 50 to 60% of the market share and their listings are only with Compass first, then Compass agents gets the deals. Why don’t they want a transparent market?”
There are two controversies with Compass, according to appraiser Jonathan Miller.
“They bypassed federal oversight and were able to merge with Anywhere creating a monopoly or a near monopoly in many housing markets across the country,” Miller said, adding that the FTC limits market share to 30%. Compass declined to release its market share when asked by Gimme Shelter.
The other problem, Miller said, is that Compass is misleading consumers into believing that private listings get better prices when, he alleges, they don’t. He added that “testing the market” by way of private listings is “ridiculous. It’s like asking your neighbor what you think the value of your home is.”
“It’s a classic antitrust story,” a former Justice Department antitrust enforcer told Gimme Shelter.
“If you create an alternative that isn’t open, you are excluding people,” he added. “The solution should not be to create a cartel outside of Zillow. How do you prevent Zillow from becoming the Google of real estate without giving large brokerage firms massive power? It’s not an easy question to answer.”
Freedman also said that the private listings are a threat to fair housing rules.
To that end, Senators Elizabeth Warren and Cory Booker have called for the FTC to investigate anti-competitive and deceptive practices that include private listings in part because they are barriers to access, thereby undermining fair housing objectives.
While Compass would not comment on how much it is paying in legal fees to defend and fight the MLS networks, it is also paying $100 million a year to service its $3 billion debt to purchase Anywhere.
“Compass has so much control of the market and their policies to hide inventory is anti-competitive and bad for consumers,” Freedman said. “Real estate brokers are supposed to put their clients’ interest first — not the company.”
Not all Compass brokers use the private listing network, even though Compass managers actively encourage it with financial incentives. Ultra-high-end brokers in New York and LA with $50 million-plus listings tell Gimme Shelter that their clients prefer to list publicly.
One of them, in New York, is an $88 million listing at 432 Park Ave. that is also asking $250,000 a month in rent — the city’s most expensive listing, as Gimme reported exclusively. Another one in the same building is also now asking $250,000 a month and was never marketed on the Compass private listing site. The listing’s broker, Richard Steinberg, of Compass, declined to comment.
According to Freedman, Compass — through its private listings — operates “behind the scenes. ” She adds that Compass “would like to be like the MLS, along with mortgage and title, and they want to remove the aggregator and be the search where people look to monetize everything. It’s a different model, and they should do that — but not on the backs of the consumer and misleading buyers. That’s where you have to draw the line. There is concern that it could be dangerous to the industry. We don’t want to go back to 20 or 30 years when we didn’t know what was going on.”