REX Brief in Zillow & NAR Antitrust Case Points To Collusion
REX continues fight to end segregation rule that drives up the cost of homebuying, reduces choice, and stifles innovation
REX has filed a reply brief in the Austin startup's case against Zillow and the National Association of Realtors (NAR) over the real estate segregation rule, which puts the interests of legacy real estate brokers before consumers. REX's brief explores how Zillow and NAR worked together to segregate big broker and other trade association member listings from listings of tech competitors like REX. The combination between the dominant platform and the largest realty trade group, which sets the terms for competition among its broker members, conflicts with federal antitrust law by squelching innovation and hindering consumer choice.
"The segregation rule has no place in real estate,” said REX CEO Jack Ryan. "REX is committed to making all listings accessible to all consumers through digital technology and an honest approach to every customer. Zillow and NAR now admit that the segregation rule has no benefit to consumers. REX backs its words with actions. We will always stand with consumers and deliver the best real estate experience through technology and talent, not by segregating homes and coercing consumers. If Zillow and NAR are unwilling to end the segregation rule, the court should end this indefensible rule immediately."
REX's brief comes after the digital real estate company filed a motion for an injunction prohibiting Zillow from continuing to segregate listings. Zillow's web display once aggregated all homes for sale on a single web display. The segregation rule, laid out by NAR to benefit its legacy, bricks-and-mortar member companies, moves in the opposite direction by separating listings that once appeared on the same page into different displays. Zillow agreed to follow the segregation rule when the company announced it was becoming a real estate broker and joining NAR and other broker associations.
Since locking arms with legacy brokers, Zillow's site now places the homes listed by innovators under a deceptively labeled "Other listings" tab, which actual consumers call the "hidden" tab. Zillow's new display forces consumers to search for and click on a separate tab simply to access homes with lower commissions, listed outside the traditional broker networks that have not kept pace with technology change. REX is a licensed agent in every state in which it operates.
As REX points out, the effect of the segregation rule is to protect the outrageously high commissions brokers collect on homes sold through the traditional brokerage process. Consumers typically pay 5 to 6 percent of the home price in commissions when they purchase homes sold through the traditional process. Harnessing digital technology and predictive analytics, REX has saved consumers millions of dollars by bringing commissions down to as low as 2.0 to 2.5 percent. The segregation rule banishes REX’s listings to a hidden tab, propping up the egregiously expensive and outdated traditional model that charges homeowners upward of 40 thousand dollars to sell a median-priced home in the Seattle area, where REX brought this lawsuit against Zillow and NAR. The segregation rule, which is at the center of the suit, has no consumer benefit and should be ended immediately.
REX's filing today is supported by an expert report prepared by Dr. Robert Majure, the former lead antitrust economist at the U.S. Department of Justice. Dr. Majure’s report has found no evidence of any consumer benefit from the segregation rule and shows that eliminating the rule would be optimal for home shoppers using online platforms to find their next homes.
Highlights from the REX filing include:
Neither NAR nor Zillow suggests that the segregation rule provides any consumer benefit. Zillow admits that ending the rule would improve the consumer experience. This alone establishes ongoing injury to consumers and justifies a preliminary injunction.
Zillow cannot dodge responsibility by registering its distaste for the segregation rule. As the United States Supreme Court has long held, going along with an illegal scheme is as much a violation of federal antitrust law as the creation and promotion of one.
Zillow’s continued segregation causes confusion for customers who will seldom find homes listed on the segregated tab and are driven to transact with legacy brokers, many of whom collect 5 to 6 percent of the home's value in hidden commission costs and fees.
Dr. Majure’s report highlights the pro-consumer benefits of ending the segregation rule and allowing nascent real estate competition to flourish.
The preliminary injunction REX seeks, if granted, would minimize harm to REX during the pendency of this lawsuit, and improve Zillow’s website.
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