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The three-judge panel on the Ninth Circuit Court docket of Appeals peppered an lawyer for the now-defunct low cost brokerage REX with questions that lie on the coronary heart of its argument that Zillow labored with the Nationwide Affiliation of Realtors to drawback non-multiple itemizing service listings on the portal’s web site.
REX, often known as Actual Property Alternate, is locked in a years-long authorized marketing campaign towards Zillow and NAR over a change in coverage that, it argues, helped drive the low cost brokerage out of enterprise.
The corporate introduced its case to the Ninth Circuit on Thursday, the place attorneys for Zillow, REX, NAR and the Division of Justice targeted on a shift in Zillow’s enterprise mannequin and whether or not NAR’s no-comingling rule was actually non-obligatory or amounted to an unlawful restraint of commerce.
The case zeroes in on Zillow’s determination in 2019 to develop into an MLS participant to acquire Web Knowledge Alternate (IDX) listings, which meant complying with guidelines created by NAR and adopted by MLSs that Zillow joined.
Amongst these guidelines was the so-called no-comingling rule, which sought to separate NAR-affiliated listings from different listings.
After becoming a member of lots of of MLSs to acquire IDX feeds, Zillow complied with the rule beginning in January 2021 by making a two-tab system on its web site. Listings that complied with the no-comingling rule have been what customers noticed by default. In the event that they wished to see non-MLS listings, customers must click on a tab labeled “Other Listings.”
The change led views of non-MLS listings on Zillow to plummet; REX wound down its residential brokerage enterprise about 18 months later.
On Thursday, not less than one choose appeared to suggest that REX’s case centered on Zillow’s enterprise determination to revamp its web site.
“What seemed like what was most problematic for your clients was the website layout and design,” Choose Daniel Aaron Bress mentioned. “That is the question I have: When the district court characterized the problem that your clients have with this, it seems like the problem was more specifically with the website, which was really an effort to implement the rule and is not necessarily the rule itself.”
REX’s lawyer tried to get the panel to concentrate on the no-comingling rule itself and Zillow’s determination to start complying with it.
“Our position consistently was that the agreement in restraint of trade was the agreement to segregate,” Ursula Ungaro argued. “Yes, the website is the implementation of the rule. But under this court’s decision in [a separate case], the starting point is the restraint; what happens beyond that is implementation and should be of no consequence.”
“Zillow, had it not combined with the NAR, could have taken any position that it wanted to as to REX,” Ungaro later added. “The problem is that Zillow combined with NAR in an anti-competitive scheme.”
Bress and Choose Ana de Alba repeatedly highlighted Zillow’s web site design throughout their questioning of Ungaro, who tried bringing the main target again to the rule itself because the supply of an unlawful scheme.
“How could Zillow have changed its business model to get the IDX data and avoid antitrust liability?” de Alba requested.
“I don’t know. I haven’t really given that a lot of thought. But the fact of the matter is that in order to get the IDX data they had to join the anticompetitive scheme,” Ungaro responded.
Optionally available or not?
The judges additionally homed in on the truth that the no-comingling rule was technically non-obligatory and that 71 p.c of MLSs had adopted it. The query is central to REX’s argument on enchantment.
Ungaro argued that, in impact, the rule wasn’t non-obligatory. As an alternative, she mentioned, it represented a concerted motion by NAR and MLS individuals like Zillow to restrain commerce.
“Our position on the optional label that NAR attached to the rule is that it’s a red herring. The real issue is concerted action,” Ungaro mentioned. “For nearly a century, the United States Supreme Court has looked past optional labels.”
“It’s optional at one level. At the next level, it’s not optional; it’s mandatory. If the MLS adopts it, they have to impose it on the participants. If the participants violate the rule, then they’re subject to sanctions,” she mentioned. “Importantly, for Zillow’s purposes, one of the sanctions would have been potentially the loss of the IDX feeds.”
Ungaro famous that NAR dictated that the no-comingling rule couldn’t be altered if adopted.
Zillow and NAR reply
For its half, Zillow labored to maintain the concentrate on its compliance with the rule as merely an replace to its web site.
Steve Engel, an lawyer for Zillow, advised REX was trying to shift its argument after a number of earlier court docket losses, and he make clear an obvious compromise he mentioned Zillow crafted for REX earlier than REX sued Zillow.
Each Zillow and NAR labored to argue that there was no settlement between Zillow and NAR.
“The reason why the district court thought the optionality of the no-comingling rule was relevant was because REX argued a direct conspiracy and an agreement between NAR and Zillow,” Engel mentioned. “It’s certainly relevant in deciding whether NAR and Zillow — which have no agreements between the two of them — it’s certainly relevant to think that all NAR apparently has done is propose an optional rule 20 years ago that some others have followed.”
Engel advised there was a form of hierarchy of NAR guidelines, and that the no-comingling rule is the bottom tier.
“NAR has mandatory rules. NAR has recommended rules. And then NAR has optional rules,” he argued. “This is the lowest category of moral suasion or any kind of suasion that NAR does.”
Earlier than updating its enterprise mannequin in 2021, Zillow reported internet hosting an estimated 98 p.c of all listings. Nevertheless it famous it had massive gaps in some markets, the place as many as 30 p.c to 35 p.c of listings have been lacking earlier than it moved to the IDX feed mannequin.
Engel mentioned Zillow created the framework of what he referred to as a “workaround” of the rule that might have allowed REX listings to seem on the principle web site in trade for $1 per itemizing.
“Before Zillow was able to present this to REX, REX sued,” Engel mentioned, “and so here we are.”
DOJ weighs in
The arguments additionally included an look by the Division of Justice, which beforehand submitted an amicus temporary within the case in June in help of neither get together. The DOJ didn’t take an overt place within the case’s final end result, however it’s asking the court docket to rule in REX’s favor and to ship the case again to district court docket.
Alice A. Wang, counsel to the assistant lawyer common on the DOJ’s Antitrust Division, zeroed in on the query of optionality and mentioned the district court docket failed to contemplate two of three key factors.
“An optional rule could be mandatory in practice,” Wang mentioned, laying out the primary level. “Second, the adoption of an optional rule can itself be concerted action.”
“And third, an optional rule can serve as an invitation for others to join in a common plan,” Wang added.
She mentioned the district court docket regarded on the first level, however not the second or third, and she or he requested the judges to rule in REX’s favor.
