“The judge’s decision creates a loophole that could allow associations to circumvent antitrust scrutiny by disguising restrictive rules as optional rules,” the DOJ filing said. The brief could bring new help to REX’s case .
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The U.S. Department of Justice (DOJ) weighed in on the legal case between Real Estate Exchange (REX) and Zillow in a new brief filed Thursday that could have far-reaching consequences for properties nationwide. NAR Optional “No Mixing” Rules.
The Justice Department’s approach to the case challenges a ruling earlier this year that denied REX a chance for a retrial.
NAR’s “no intermingling” rule requires listing platforms to adopt the rule to separate MLS listings from non-MLS listings. In REX v. Zillow, discount brokerage REX, which did not operate within an MLS during its active period, argued that Zillow’s adoption of a “no commingling” rule limited REX’s visibility on the platform.
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Central to the Justice Department’s new brief is the “optional nature” of the “no mixing” rule, which the department said does not preclude its potential anticompetitiveness. The U.S. Department of Justice further argued that the court’s previous decision denying REX rehearing did not fully consider the possibility that associations such as NAR could circumvent antitrust regulations by formulating such optional rules.
“The judge’s decision creates a loophole that may allow associations to circumvent antitrust scrutiny by disguising restrictive rules as optional rules,” the DOJ filing said. The filing also noted that despite the NAR’s “no commingling” rule, Optional, but according to the NAR Manual, entities adopting this rule must do so entirely because the rule “cannot be modified.”
The Justice Department further argued in its brief that Supreme Court precedent indicates that optional rules may involve “concerted action,” making the rules “enforceable in practice.” Such optional rules could also “invite others to participate in a common scheme,” the Justice Department said, which is largely what makes REX’s court argument attractive — with the brokerage arguing that NAR, MLS and ultimately Zillow acquiesced and The “no mixing” rule was followed.
“This court should quash the following judgment and remand the case to the district court for retrial to fully consider whether there is sufficient evidence to prove concerted action in this case [common plan] theory,” the Justice Department brief reads.
REX sued Zillow after listing portal Zillow changed its model in 2021 and became a licensed broker to provide direct access to the MLS’s online data exchange source.
At that time, Zillow also became a member of NAR, and its brokers became members of the local MLS. Since most of the MLSs that Zillow and its brokers participate in have adopted “no commingling” rules, Zillow is also required to comply with the rules of the regions where these MLSs are located. In response, Zillow split its search portal into two tabs, one for “Agent Listings” and the other for “Other Listings.”
As a non-MLS member, REX’s listings were relegated to the “Other Listings” tab, and the brokerage claimed that page views for its listings on Zillow dropped 80% after the changes to the Zillow website took effect.
A brief note from the U.S. Department of Justice pointed out that Zillow was also hesitant to adopt the “no mixing” rule, but had to do so in order to obtain MLS data, which shows the importance of MLS rules on the market.
“Although Zillow disagreed with the rule, it complied by retaining access to MLS data,” the Justice Department said.
REX has not been operating since May 2022, but legal proceedings continue. After the company’s request for rehearing in January was denied, REX filed a motion the following month to appeal the ruling.
The ball now returns to the Ninth Circuit to decide whether to send the case back to the district court to continue proceedings. The DOJ’s latest announcement may be just what REX needs to tip the scales in its favor and continue fighting for what it considers fair market access when it comes to ad listings.
See the Department of Justice’s full summary here.
Email Lillian Dixon
