CoStar Group Challenges Zillow in Court

CoStar Group, which runs Homes.com, has submitted a legal brief in the case of Zillow Group, Inc. vs. Midwest Real Estate Data LLC. They have accused Zillow of limiting access to its own pre-market listings while expecting competitors to provide open access to their listings.

In May, Zillow and the brokerage firm Compass initiated a lawsuit against Midwest Real Estate Data (MRED), a multiple listing service (MLS) located in the Chicago area. Zillow claimed that it competes with MRED and Compass, and might lose access to MRED’s listings of properties in the Chicagoland area due to MRED opposing Zillow’s ban on pre-MLS listings, especially those listed by Compass. Zillow is requesting that a federal court grants it unrestricted access to MRED’s full database while still keeping its policy against pre-MLS listings.

CoStar’s brief states that Zillow’s lawsuit fails to address critical details. A couple of months back, shortly after Zillow celebrated an “equal access” win in a related case with Compass, it introduced a new pre-market feature called Zillow Preview. According to CoStar, Zillow developed this feature through an exclusive contract with around 60 major brokerages, preventing competitors such as Homes.com from acquiring pre-MLS listings from firms like RE/MAX and Keller Williams, which Zillow hasn’t shared.

Zillow stated in the lawsuit, “It is basic economics that the free flow of information supports efficient and competitive markets. In residential real estate, property details are vital for all market participants.”

The main point in CoStar’s legal brief is that Zillow’s actions embody the same anticompetitive behavior it accuses its rivals of. CoStar argues that while Zillow advocates for “free flow” of property listings, the listings on Zillow Preview are exclusive to Zillow and Realtor.com, meaning they don’t circulate to other platforms. The brief indicates that these listings could remain exclusive to Zillow Preview for varying periods, possibly never reaching MLS or competing services. CoStar suggests this is much like the “coming soon” pre-market listing approach used by Compass.

Compass also utilizes another type of pre-MLS listing known as “Phase 1” or “Private Exclusive” listings. Zillow asserts that these are only available to particular clients who choose to work with Compass. CoStar contends this doesn’t strengthen Zillow’s position. Just as Phase 1 listings are limited to those who engage with Compass, Zillow Preview listings are restricted to visitors of Zillow and its partners’ sites. It argues that Zillow does not function as a neutral platform and is central in its ecosystem.

CoStar claims that despite Zillow advocating for transparency, it prevents visibility from other platforms and compels users to engage with its services even if they’d prefer a site like Homes.com. The brief mentions, “Users accessing Zillow Preview are attracted to it. Here, they face lead diversion, mortgage steering, and additional methods that serve Zillow’s interests over consumers’. This isn’t impartial access; it’s tied to Zillow’s monetization strategies.”

CoStar characterizes exclusive pre-market listings as the start of practices that take advantage of consumers in the homebuying experience. It notes that some of these practices are involved in ongoing consumer class actions.

CoStar’s brief argues for the dismissal of Zillow’s claims, stating that the damages Zillow refers to are self-inflicted. Zillow loses access to the MRED feed because of its own competitor pre-market listing ban when it pushes its own pre-market products. The brief further posits that Zillow cannot demand unrestricted rights to others’ listings while denying competitors like Homes.com access to its own pre-MLS listings.

CoStar argues that allowing Zillow full access to MRED’s listings while barring competitors from pre-listing data would lead to an imbalanced market structure rather than promoting a free exchange of information.

CoStar and industry analysts view the MRED lawsuit as part of Zillow’s wider strategy to usurp the current MLS system it’s up against. The brief, along with commentary, frames the lawsuit as a caution to other MLSs nationwide about granting Zillow access to their listings or facing legal actions, despite Zillow claiming to hold “the most valuable” pre-MLS listings.

In a related note, Zillow recently made headlines by integrating “climate change risk data” into its property listings.