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Defunct discount brokerage REX Real Estate is not giving up in its antitrust battle against Zillow and the National Association of Realtors (NAR).
On Monday, REX filed a petition of rehearing en banc with the Ninth Circuit Court of Appeals. It is appealing a U.S. District Court’s summary judgment ruling that NAR and Zillow did not break antitrust laws when NAR promulgated its no-commingling rule and Zillow redesigned its website in order to follow the rule.
The appeal was heard by a three-judge panel in mid-February. In the new petition, REX is asking for a rehearing of the case in front of all 11 judges in the Ninth Circuit.
‘Flat wrong’ ruling?
According to REX, the three-member panel’s decision to affirm the lower court’s ruling that NAR’s optional no-commingling rule is not an antitrust violation is erroneous. REX claims the ruling conflicts with precedents set by both the U.S. Supreme Court and the Ninth Circuit.
REX believes the panel’s opinion is based on “the absence of evidence of concerted action, and the conclusion that Zillow ‘independently re-designed its website.’” In the filing, REX asserts that the panel’s view that the rule itself is not direct evidence of concerted action “is flat wrong and obviously so.”
“Optional or not, the no-commingling rule was promulgated by NAR, a trade association composed of brokers and agents who compete with one another except when they are acting in concert by using NAR to coordinate their activities to protect their commissions and otherwise forestall competition,” the filing states.
REX goes on to state that perhaps the panel meant that the rule is not direct evidence of concerted action between NAR and Zillow. Ultimately, however, this is not what REX feels the panel meant.
“What the panel said started it down the wrong path and led to error. Instead of recognizing the Rule for what is the end result of concerted action by NAR’s members the panel treated NAR as if it were a single entity apart from its members, which could not conspire with itself, requiring REX to prove an agreement between NAR and Zillow from scratch,” the petition states.
“That is an error. Because the Rule itself was the product of concerted action among NAR members, there is also concerted action when anyone later joins NAR and agrees to adopt or enforce the Rule, as Zillow did. As the DOJ explained in its amicus brief and at oral argument, the Rule is a standing invitation to NAR members to ratify, adopt or enforce the Rule.”
Additionally, REX believes the panel erred when it treated MLSs owned by Realtor associations as if they “had nothing to do with NAR.”
“The record shows, however, that local realtor associations, composed of NAR members, establish NAR-affiliated MLSs, which the associations own or operate, either alone or in conjunction with other associations,” the petition states. “Conduct of NAR MLSs is governed in minute detail by NAR’s Handbook on Multiple Listing Policy. Given the control that NAR members exercise over NAR MLSs through their national organization, NAR MLSs are instrumentalities of NAR members.”
In addition to these complaints, REX also believes that the panel incorrectly focused on Zillow’s website redesign and what prompted the redesign instead of the rule. By redesigning its website and separating listings, Zillow played a part in enforcing the rule.
Four-year court battle
Time will tell if REX’s petition is successful.
Originally filed in March 2021, the lawsuit alleges that changes made to Zillow’s website “unfairly hides certain listings, shrinking their exposure and diminishing competition among real estate brokers.”
Two months before that, Zillow began moving homes not listed on the MLS out of initial user search results and onto a second tab. This adhered to an optional NAR rule, which prevents those who choose to adopt it from commingling MLS listings with non-MLS listings.
Despite noting that it did not support this rule, Zillow claims it was forced to adopt it to obtain IDX feeds from MLSs that had. This precipitated the two-tab design for MLS listings and “other listings.”
In May 2022, REX ceased its brokerage operations. And a little over a year later, the three parties involved in the case each filed motions for summary judgment on either the entirety of the lawsuit or portions of it.
Judge Thomas Zilly, who oversaw the case, dismissed REX’s antitrust claims against NAR and Zillow. But he allowed the discount brokerage’s false advertising claim under the Lanham Act, along with a claim for unfair or deceptive trade practices under the state of Washington’s Consumer Protection Act, to stand.
At a trial in September 2023, the court ruled in favor of Zillow on the remaining charges. Roughly six weeks later, REX filed its motion for a new trial. In the request, REX argued that it was unfairly prevented from presenting testimony about agent commissions to the jury.
A Seattle jury ultimately found that REX did not prove Zillow used false advertising in its decision to put non-MLS listings on a different section of the website. It also found that Zillow proved its defense on REX’s second claim that Zillow acted deceptively and unfairly.
REX filed its appeal in February 2024 after Zilly denied its motion for a new trial.
