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DOJ Urges Reconsideration in REX vs. Zillow Antitrust Case Over NAR Rules

 |  June 23, 2024

In a significant development in the ongoing legal battle between The Real Estate Exchange (REX) and Zillow, the Department of Justice (DOJ) has weighed in, asserting that optional rules of the National Association of Realtors (NAR) may still foster anticompetitive behavior. This stance, outlined in a brief filed on June 20, challenges a previous ruling that denied REX a retrial earlier this year.

The crux of the issue lies in NAR’s “no-commingling” rule, which dictates that real estate platforms using MLS data cannot display MLS listings alongside non-MLS listings. REX, a discount brokerage that operates outside traditional MLS channels, alleged that Zillow’s compliance with this rule unfairly restricted visibility for its listings on the popular real estate platform.

According to the DOJ’s amicus curiae brief, the “optional nature” of NAR’s rule does not absolve it from potentially stifling competition in the market. The department argues that the earlier court decision failed to fully scrutinize the risk of associations like NAR avoiding antitrust oversight through such optional regulations.

Read more: Judge Rules Zillow CEO Can Be Deposed In Antitrust Case

“The judge’s decision created a loophole that could allow associations to sidestep antitrust scrutiny by cloaking restrictive rules as optional,” the DOJ stated in its filing. As a result, the DOJ recommended that the Ninth Circuit U.S. Court of Appeals overturn the previous ruling in favor of Zillow and NAR, thereby reopening the case for further review at the District Court level.

The REX vs. Zillow case has broader implications for the real estate industry, particularly concerning commission structures and the role of MLSs in regulating them. REX, which chose to bypass MLSs to avoid mandatory commissions typically required by NAR-affiliated MLSs, argued that its exclusion from full MLS integration on Zillow disadvantaged its listings unfairly.

Zillow, in response, segregated non-MLS listings, including those from REX, into a separate tab to comply with NAR rules, a move that REX claimed significantly reduced visibility and thereby constrained trade.

“While Zillow disagreed with the rule, it complied to maintain access to MLS data,” the DOJ’s brief noted, underscoring the broader economic impact of MLS rules on market dynamics and competition.

REX, though not currently operational since May 2022, remains engaged in the legal fight, with co-founder Lynley Sides expressing optimism about restarting operations when conditions permit.

The next steps hinge on the Ninth Circuit’s decision on whether to remand the case back to the District Court for further proceedings. If the court agrees with the DOJ’s recommendation, REX could potentially secure another chance to argue its case for fair market access against Zillow and NAR’s regulatory framework.

Source: Real State News