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`UNITED STATES DISTRICT COURT
`WESTERN DISTRICT OF WASHINGTON
`AT SEATTLE
`
`
`
`
`
`
`No.
`
`COMPLAINT FOR INJUNCTIVE
`RELIEF AND FOR DAMAGES
`
`DEMAND FOR JURY TRIAL
`
`
`
`REX – REAL ESTATE EXCHANGE, INC., a
`Delaware corporation,
`
`
`
`
`
`ZILLOW, INC., a Washington corporation;
`ZILLOW GROUP, INC., a Washington
`corporation; ZILLOW HOMES, INC., a
`Delaware corporation; ZILLOW LISTING
`SERVICES, INC., a Washington corporation;
`ZILLOW GROUP MARKETPLACE, INC., a
`Washington corporation; TRULIA, LLC, a
`Delaware limited liability company; and THE
`NATIONAL ASSOCIATION OF REALTORS,
`an Illinois trade association,
`
`
`
`
`
`Plaintiff,
`
`v.
`
`Defendants.
`
`1.
`
`REX – Real Estate Exchange, Inc. (“REX”) brings this action against Zillow,
`
`Inc., Zillow Group, Inc., Zillow Homes, Inc., Zillow Listing Services, Inc., Zillow Group
`
`Marketplace, Inc., Trulia, LLC (collectively “Zillow”), and the National Association of
`
`Realtors (“NAR”) under federal and state antitrust laws, the Lanham Act, and deceptive trade
`
`laws and alleges as follows:
`
`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 1
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
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`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 2 of 48
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`
`
`I.
`
`NATURE OF THE ACTION
`
`2.
`
`REX brings this lawsuit to keep the digital hubs of the real estate economy open
`
`so that consumers have the benefit of innovation and cost savings that come from competition.
`
`The internet has radically altered how Americans shop for homes. For most consumers, home
`
`buying begins on a mobile device or laptop. Consumers can search for homes by location,
`
`price, square footage, numbers of bedrooms and bathrooms, and other categories. In an instant,
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`consumers can view images of homes that fit their preferences—and much more. The internet
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`continues to evolve to satisfy the needs of home buyers. In addition to finding properties,
`
`home shoppers can tour properties virtually. Offers are now made online and closing
`
`documents are notarized on Zoom.
`3.
`
`Websites that aggregate homes for sale are the digital hubs of the new real estate
`
`economy. They attract billions of views every year by gathering a vast inventory of homes and
`
`allowing consumers to customize their searches. Search capabilities allow consumers to find
`
`individual residences within predefined parameters and then track properties that interest them.
`
`Consumers can now perform a substantial amount of their home searches online, at their
`
`leisure, instead of spending weekend after weekend at open houses and showing appointments.
`4.
`
`Aggregator sites facilitate transactions that allow millions of Americans every
`
`year to relocate for new personal and professional opportunities. Home sellers know that
`
`interested buyers flock to aggregator sites and highly value having their homes listed on those
`
`sites.
`
`5.
`
`This democratization of access to real estate inventory changes the old dynamic.
`
`The NAR and Multiple Listing Services (“MLS”) largely controlled access to real estate
`
`markets, and related brokerage services, because they controlled home inventory information.
`
`Direct consumer access to available homes—and the ability for non-NAR, non-MLS licensed
`
`brokers and agents to make homes directly visible to consumers—opens the pathway for new,
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 2
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 3 of 48
`
`
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`innovative real estate service providers. And, critically, it introduces competition that benefits
`
`consumers through greater choice and downward pressure on traditionally high commission
`
`structures.
`6.
`
`REX co-founders Jack Ryan and Lynley Sides launched REX in 2015 to disrupt
`
`the traditional real estate model by putting consumers first. REX’s innovative model uses
`
`technology to enhance efficiency and drastically reduce brokerage commissions, while
`
`delivering a full suite of personalized services to clients.
`7.
`
`The legacy real estate industry transfers billions of dollars in commissions every
`
`year from home sellers to brokers. In the typical real estate transaction under the traditional
`
`model, the seller is represented by an agent who collects a commission in the range of 2.5 to
`
`3% of the sale price. The thousands of dollars in commissions paid to the seller agent are
`
`only part of the commission fees. Under rules written by NAR and enforced by its member
`
`MLSs, sellers must also make what is essentially a non-negotiable offer of compensation to
`
`any agent representing the ultimate purchaser, generally another 2.5 to 3% of the sale price—
`
`with total commissions averaging about 5.5%. Total commissions in a REX transaction
`
`average 3.3%, representing a 40% discount. REX has already returned more than $29 million
`
`in commission savings to consumers and is on pace to save consumers more than $100 million
`
`annually. On a $720,000 home sale—the median price in King County, where REX recently
`
`opened operations—consumers would save $16,000 in commissions using REX's data-driven,
`
`direct-to-consumer model.
`8.
`
`REX’s innovative and competitive model is now threatened by the concerted
`
`action of the NAR and Zillow, along with their MLS affiliates. Zillow recently joined NAR-
`
`affiliated MLSs and adopted their associational rules to conceal all non-MLS listings on
`
`Zillow’s heavily trafficked websites. These listing portals, as explained below, are critical
`
`channels to reaching consumers. Zillow’s recently implemented website changes make non-
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 3
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 4 of 48
`
`
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`MLS listings accessible only via a recessed, obscured, and deceptive tab that consumers do not
`
`see, and even professional real estate agents find deceiving. The result is that REX’s listings
`
`are losing significant traffic, severely impacting REX’s reputation, its ability to execute its
`
`innovative and disruptive business model, and driving consumers away from REX and back
`
`into the MLS regime, ensuring higher commissions that benefit NAR’s members.
`9.
`
`If the NAR and its MLS partners, which now include Zillow, are allowed to
`
`once again close off transparent access to home inventory by entering into agreements among
`
`themselves that disadvantage all but their own membership, consumers and competition will
`
`suffer.
`
`II.
`
`THE PARTIES
`
`10.
`
`Plaintiff REX is a Delaware corporation in good standing, incorporated as REX
`
`- Real Estate Exchange, Inc., with its principal place of business at 3300 N Interstate Hwy 35,
`
`Suite 149, in the City of Austin and State of Texas.
`
`11.
`
`Defendant National Association of Realtors is a trade association organized and
`
`existing as a non-profit corporation under the laws of the State of Illinois with its principal
`
`place of business at 430 N Michigan Avenue in the City of Chicago and State of Illinois. NAR
`
`has members residing in the State of Washington and within this District. NAR may be served
`
`through its registered agent.
`
`12.
`
`Defendant Zillow, Inc. is an online real estate marketplace company. Zillow,
`
`Inc. is a general corporation organized and existing under the laws of the State of Washington
`
`with its principal place of business at 1301 Second Avenue, FL 31, in the City of Seattle and
`
`State of Washington. Zillow, Inc. maintains real estate brokerage licenses in a number of
`
`states. It may be served through its registered agent.
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 4
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 5 of 48
`
`
`
`13.
`
`Zillow Group, Inc. offers online real estate services and is a general corporation
`
`organized and existing under the laws of the State of Washington with its principal place of
`
`business at 1301 Second Avenue, FL 31, in the City of Seattle and State of Washington. It
`
`may be served through its registered agent.
`
`14.
`
`Zillow Homes, Inc., is organized and existing under the laws of the State of
`
`Delaware, with its principal place of business at 1301 Second Avenue, FL 31, in the City of
`
`Seattle and State of Washington. It maintains real estate brokerage licenses in a number of
`
`states. It may be served through its registered agent.
`
`15.
`
`Zillow Listing Services, Inc. offers miscellaneous real estate services. It
`
`maintains real estate brokerage licenses in a number of states. It is a general corporation
`
`organized and existing under the laws of the State of Washington with its principal place of
`
`business at 1301 Second Avenue, FL 31, in the City of Seattle and State of Washington. It
`
`may be served through its registered agent.
`
`16.
`
`Zillow Group Marketplace, Inc., offers online information services and is a
`
`general corporation organized and existing under the laws of the State of Washington with its
`
`principal place of business at 1301 Second Avenue, FL 31, in the City of Seattle and State of
`
`Washington. It may be served through its registered agent.
`
`17.
`
`Trulia, LLC is a limited liability company organized and existing under the laws
`
`of the State of Delaware with its principal place of business at 1301 Second Avenue, FL 31, in
`
`the City of Seattle and State of Washington and its sole governor is Zillow, Inc. It is a real
`
`estate website. It may be served through its registered agent.
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 5
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 6 of 48
`
`
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`III.
`
`JURISDICTION AND VENUE
`
`18.
`
`Plaintiff REX brings this action seeking injunctive relief, damages, treble
`
`damages, cost of suit, and reasonable attorneys’ fees, arising from Defendants’ violations of
`
`Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 and Section 1125 of the Lanham Act, 15
`
`U.S.C. § 1125. This Court has subject matter jurisdiction of Plaintiff’s federal law claims
`
`pursuant to 28 U.S.C. § 1331 (federal question) and 28 U.S.C. § 1337 (commerce and antitrust
`
`regulation). Plaintiff has standing to bring this action under Sections 4 and 16 of the Clayton
`
`Act, 15 U.S.C. §§ 15, 26.
`
`19.
`
`Plaintiff’s state law claims under the Washington Consumer Protection Act,
`
`RCW Ch. 19.86, arise out of the same factual nucleus as Plaintiff’s federal law claims. This
`
`Court has subject matter jurisdiction of Plaintiff’s pendent state law claims pursuant to 28
`
`U.S.C. § 1367, which should be exercised in the interests of judicial economy, convenience,
`
`and fairness.
`
`20.
`
`This Court has personal jurisdiction over Zillow and NAR and venue is proper
`
`here pursuant to 28 U.S.C. § 1391(b)(2). Zillow Defendants are headquartered and/or
`
`organized in Washington and have engaged in acts in furtherance of an unlawful restraint of
`
`trade within the state and this District. Zillow’s own Terms of Service specify exclusive venue
`
`in state or federal court in King County, Washington.
`
`21.
`
`NAR regularly transacts business within Washington and this District. In 1908,
`
`the predecessor to Seattle King County Realtors became one of “19 charter members” of the
`
`NAR, with which they are still affiliated, noting that local members enjoy the “added security
`
`of a team of advocates standing with them and for them, to protect their interests, from Seattle
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 6
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 7 of 48
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`
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`to Olympia to D.C.” This Seattle/King County affiliate of NAR is headquartered in Bellevue,
`
`Washington. NAR has also committed substantial acts in furtherance of its illegal restraint of
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`trade within the state and this District.
`
`22.
`
`REX employs licensed real estate agents and has real estate listings in this
`
`District and in other locations across the country, all of which have been affected by Zillow’s
`
`change in web display. Zillow operates its website, including the new web display, within this
`
`District.
`
`A.
`
`23.
`
`IV.
`
`FACTS
`
`Traditional NSR/MLS Residential Real Estate Brokerage Services
`
`Brokers, agents, and REALTORS® participate in the marketplace for residential
`
`real estate brokerage services in local markets throughout the United States. Brokers and
`
`agents are licensed by the state through education programs and successful completion of a real
`
`estate exam. Brokers can work independently or employ other agents through their own
`
`brokerage. Agents work for a supervising broker to facilitate real estate transactions, bring
`
`buyers and sellers together, and are paid a commission. Some agents are also REALTORS®.
`
`REALTORS® are members of the NAR.
`
`24.
`
`NAR is the nation’s largest trade association, boasting 1.45 million members, 54
`
`state and territory associations, and approximately 1,130 local associations. The mission of the
`
`NAR, as stated by the organization’s CEO Bob Goldberg, is to advance the interests of its
`
`members. In a recent speech, Goldberg explained the NAR’s top priorities: “First and
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 7
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 8 of 48
`
`
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`foremost, it’s imperative that we are not just the National Association OF REALTORS®, we
`
`are also the National Association FOR REALTORS®.” (emphasis in original).1
`
`25.
`
`The NAR controls a large portion of MLSs through local associations of
`
`realtors, which are members of and governed by the NAR. The reach of NAR is extensive, as
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`demonstrated by NAR’s map of affiliated MLSs.2
`
`26.
`
`Based on statistics cited by the NAR, there are approximately two million active
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`real estate licensees in the United States. At least seventy percent of active licensees are NAR
`
`members.3
`
`
`
`
`1 CEO Update – 2017 Board of Directors, https://www.nar.realtor/ceo-update-2017-board-of-directors (last visited
`Mar. 6, 2021).
`2 MLS Map of the National Association of Realtors®, NAR, https://www.nar.realtor/mls-map-ofthe-national-
`association-of-realtors (last visited Mar. 6, 2021).
`3 National Association Realtors, Quick Real Estate Statistics, nar.com, https://www.nar.realtor/research-and-
`statistics/quick-real-estate-statistics (last visited Feb. 26, 2021).
`
`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 8
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
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`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 9 of 48
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`27.
`
`Despite the size and scope of the NAR and its affiliates, obtaining a state license
`
`to represent consumers as a broker or agent is not conditioned on membership in the NAR,
`
`MLS, or any other private association.
`
`28.
`
`In other words, licensed real estate professionals can compete outside the NAR
`
`and MLS strictures, or could effectively compete, absent anticompetitive interference from the
`
`NAR and MLSs.
`
`29.
`
`The NAR is the rare trade association that sets the rules of competition among
`
`its members. The rules of the NAR and its member MLSs stray far beyond ethical guidelines.
`
`NAR and MLS rules specify in detail how listings must be presented. They have mandates
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`governing mutual data exchanges and the structure of compensation offers. MLSs even
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`discipline members with financial penalties. Because of the size and scope of the NAR and
`
`MLSs, these rules have become ubiquitous within the marketplace—essentially making
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`consumers subject to them.
`
`30.
`
`Real estate brokers and agents are compensated through the commissions they
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`earn on transactions. Seller agents represent the homeowner. These agents are often referred to
`
`as “listing agents” because they place their clients’ properties on one or more lists of available
`
`homes for sale. Buyer agents represent clients interested in purchasing a home for sale.
`
`31.
`
`Unlike the standard arrangement in other agency businesses, home sellers and
`
`buyers generally do not pay their brokers separately. Instead, under a decades-old NAR rule,
`
`sellers agree upfront to pay commissions owed to the brokers on both sides of the deal. Under
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`the Buyer Agent Commission Rule, which is standard across many MLSs, sellers must make a
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 9
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 10 of 48
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`
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`predetermined offer of compensation to the agent representing the buyer. REX is the exception
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`to this expensive business practice rife with conflicts of interests.
`
`32. While sellers can offer any amount of compensation to buyer agents under the
`
`NAR rule, seller agents instruct their clients that they need to induce buyer agents to bring
`
`clients who may be interested in their homes. The takeaway is that sellers should offer the
`
`highest marginal price. A script for seller agents from the brokerage firm Keller Williams
`
`illustrates this dynamic:
`
`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 10
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
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`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 11 of 48
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`33.
`
`As the above script and extensive economic studies demonstrate, buyer agent
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`commissions are not pegged to the amount of work performed or skill displayed by the agent
`
`representing the home buyer. And it is virtually impossible for buyers to negotiate down buyer
`
`agent commissions during the transaction. Buyer agents are prohibited from urging the buyer to
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`negotiate with the seller directly. And once a seller agent has received an offer on a property,
`
`the seller agent and the buyer agent are prohibited from attempting to modify the buyer broker
`
`agent commission unilaterally.
`
`34.
`
`These industry practices, including mandated NAR-endorsed MLS member
`
`rules, preserve sky-high real estate fees across the United States. “Essentially, the MLS
`
`listing,” one commentator explains, “acts as a tool which competing brokers can use to help
`
`enforce a near uniform commission rate and drive out discounters.”4 Industry insiders agree
`
`with this assessment. For example, the brokerage firm and MLS-member Keller Williams
`
`candidly admits in its instructional materials that offering less than 3% in buyer agent
`
`commissions on an MLS “will reduce the number of willing and qualified buyers that will see
`
`your home.” The interbroker compensation steers consumers to high-commission properties
`
`and stifles price competition in the $100 billion market for real estate brokerage services.5 An
`
`attorney who has represented many MLSs suggests that ending mandatory payments from
`
`sellers to buyer brokers would allow buyer-side agents to price their services in line with their
`
`4 Bradford W. Muller, Encouraging Price Competition Among New Jersey’s Residential Real Estate Brokers, 39
`Seton Hall L. Rev. 665, 683 n.100 (2009).
`5 A Government Accountability Office report describes how steering works: “When choosing among comparable
`homes for sale, brokers have a greater incentive — all else being equal — to first show prospective buyers homes
`that offer other brokers the prevailing commission rate than homes that offer a lower rate.” U.S. Gov’t
`Accountability Office, GAO-05-947, REAL ESTATE BROKERAGE: Factors That May Affect Price
`Competition, 13 (2005); see also Panle Barwick, Parag Pathak, and Maisy Wong, Conflicts of Interest and
`Steering in Residential Brokerage, American Economic Journal: Applied Economics 9(3), 191–222 (empirically
`substantiating the concerns that steering explains the general uniformity of commission rates).
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 11
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 12 of 48
`
`
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`skill, experience, and the client’s needs. There would no longer a “standard” or going rate for
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`buyer agent fees.6
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`35.
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`The largest brokerage firms, including Redfin, Coldwell Banker, RE/MAX,
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`Keller Williams, Compass, and Century 21 are distinguished by their faithful support of NAR
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`and willing participation in the MLS. In stark contrast to traditional brokerage firms, REX has
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`always maintained its independence from the NAR/MLS chokehold.
`
`36.
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`Under the NAR/MLS regime, real estate commissions in the United States are
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`two to three times higher than in comparable international markets.7 Americans spend an
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`estimated $100 billion annually just on the commissions for buying and selling homes.
`
`37.
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`To put these costs in perspective, on a $720,000 sale—currently, the
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`approximate median price for home sales in King County, Washington—consumers surrender
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`upwards of $40,000 in real estate brokerage commission fees. Despite the widespread adoption
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`of online home searching, which dramatically reduces the labor requirements for agents,
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`brokerage service fees remain largely unchanged and untethered to the effort expended.
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`38.
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`NAR rules are currently the target of numerous federal cases alleging illegal
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`restraints on trade. Last year, the United States Department of Justice announced a
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`simultaneous lawsuit and settlement with NAR concerning four anticompetitive rules widely
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`enforced across NAR-affiliated MLSs: (1) NAR’s Global Commission-Concealment Rules
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`through which MLSs prohibit the disclosure of offers of compensation to buyer brokers; (2)
`
`
`6 Brian N. Larson, The End of the MLS as We Know It, Inman (Aug. 15, 2006).
`7 Panle Jia Barwick & Maisy Wong, Competition in the real estate brokerage industry: A critical review,
`Brookings Institute (Dec. 2019) at 8; Moehrl v. Nat’l Ass’n of Realtors, 2020 U.S. Dist. LEXIS 182532, at *28
`(N.D. Ill. Oct. 2. 2020) (stating that U.S. real estate commission rates are “sufficiently higher than in comparable
`international markets.”).
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 12
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 13 of 48
`
`
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`NAR’s Free-Service Rule through which buyer brokers misrepresent to buyers that their
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`services are free; (3) NAR’s Commission-Filter Rules and Practices, which enable buyer
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`brokers to filter listings based on the level of buyer broker commissions offered and thereby
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`exclude homes with lower commissions from consideration by potential home buyers; and (4)
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`NAR’s Lockbox Policy, which limits access to the lockboxes—and therefore access to the
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`homes themselves—to only brokers who are members of a NAR-affiliated MLS. According to
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`DOJ’s complaint, these rules “reduce price competition among brokers and lead to higher
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`prices and lower quality service for American home buyers and sellers.”
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`39.
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`Four other pending cases filed by consumers in district courts in Illinois,
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`Missouri, and Massachusetts challenge agent commissions. Plaintiffs in these cases transacted
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`through the MLS and allege that they paid inflated prices due to the Buyer Broker
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`Compensation Rule. Two of these four cases were filed subsequent to the DOJ action, Bauman
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`v. MLS and Leeder v. NAR. The other two, Moehrl v. NAR and Sitzer v. NAR, were filed in
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`2019, and have survived motions to dismiss. As the district court judge presiding over Moehrl
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`noted, “it is easy to understand how” the Buyer Broker Commission Rules “could plausibly
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`result in inflated commission rates.” Moehrl v. Nat’l Ass’n of Realtors, No. 19-CV-01610,
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`2020 WL 5878016, at *9 (N.D. Ill. Oct. 2, 2020). The arrangement allows for only the
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`“hypothetical possibility” of negotiating anything lower than the standard 2.5% to 3% of the
`total home sale typically paid out to buyer brokers.8
`
`
`8 In Sitzer, the district court similarly ruled that plaintiffs pled a cognizable antitrust claim. The court’s opinion
`denying the motion to dismiss referenced the incentive for buyer agents to steer clients towards homes whose sale
`necessarily results in artificially high commissions: “buyer-brokers can use their access to MLS information
`(unavailable to potential home buyers) to view details about the offered levels of buyer-broker compensation and
`dissuade clients from viewing or purchasing homes with lower buyer-broker commission offers, thus ‘steering’
`them to properties with higher-paying commissions.” Sitzer v. Nat’l Ass’n of Realtors, 420 F. Supp. 3d 903, 915
`n.4 (W.D. Mo. 2019).
`
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 13
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 14 of 48
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`
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`B.
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`40.
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`The REX Model
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`REX is a licensed broker in a number of states nationwide and employs salaried,
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`licensed real estate agents, including in Washington State. REX competes with traditional
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`brokers and agents—generally members of the NAR and/or MLSs—to provide residential real
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`estate brokerage services to consumers wishing to buy or sell homes. REX routinely represents
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`consumers on one side of the transaction while a traditional NAR or MLS member agent
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`represents the counterparty.
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`41.
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`But unlike NAR/MLS brokers who market homes through high-dollar
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`commission offers to other brokers, REX uses digital technology to market the home directly
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`to consumers looking to buy, sell, and manage their home. According to industry data, ninety
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`percent of consumers search online for a home. Seventy-three percent of consumers reported
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`using a mobile/tablet device or app for their home search. And sixty-eight percent of online
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`buyers find their home without an agent. REX’s platform allows direct-to-consumer reach and
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`reduces customer acquisition costs. Through REX’s proprietary technology, consumers can list
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`their homes from their smartphones and see their listing go live within two days with ads
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`specifically targeting interested buyers. REX’s ad generation algorithms generate personalized
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`ads targeting online home shoppers. Through REX’s end-to-end customer service experience,
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`consumers can easily search, shop, transact, manage, and move into the home of their dreams.
`
`42.
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`REX’s model is working. Rather than the average national brokerage
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`commission rate of roughly 5.5%, which includes listing and buyer agents’ commissions,
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`REX’s clients spend, on average, only 3.3% in total commissions with the anticipation of
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`driving the costs still lower.
`
`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 14
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
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`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 15 of 48
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`43.
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`Using its model over the past five years, REX already has saved consumers
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`more than $29 million in commissions. Not surprisingly, REX’s revenues have grown every
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`year.
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`44.
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`REX is now active in markets spanning nineteen states and jurisdictions
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`including Arizona, California, Colorado, D.C., Florida, Georgia, Illinois, Massachusetts,
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`Maryland, Nevada, New York, New Jersey, North Carolina, Oregon, Pennsylvania, Texas,
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`Utah, Virginia, and Washington.9
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`45.
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`REX is driving real estate commissions down for the same reason that
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`transaction costs have plummeted across the service economy. Over the past several decades,
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`advancements in information technology have slashed the fees once captured by middlemen,
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`agents, and brokers. Online travel sites have made business and leisure travel costs more
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`transparent and competitive. Charles Schwab, Ameritrade, and Robinhood have made no-
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`commission or low-commission stock trades the new normal. Uber and Lyft have lowered the
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`cost of transportation. DoorDash, Grubhub, and Instacart have reduced food delivery costs.
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`Airbnb has made lodging more affordable. Even life insurance policies are cheaper due to
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`internet-driven price competition. REX’s mission is the same.
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`46.
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`By combining digital technology with an honest approach to every consumer
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`relationship, REX aims to usher in an era of zero-commission home sales where consumers
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`would be free to move about the country without the enormous personal expense in brokering a
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`home. Americans would enjoy enhanced job mobility and educational advancement and a
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`greater chance at wealth creation for middle-class families when the transaction costs of buying
`
`
`9 REX’s application to operate in its twentieth state—Minnesota—is pending final approval with state licensing
`authorities.
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`COMPLAINT FOR INJUNCTIVE RELIEF
`AND FOR DAMAGES - 15
`Case No.:
`
`
`
`
`FG:54269278.1
`
`
`
`FOSTER GARVEY PC
`1111 THIRD AVENUE, SUITE 3000
`SEATTLE, WASHINGTON 98101‐3292
`PHONE (206) 447‐4400
`
`
`
`
`Case 2:21-cv-00312 Document 1 Filed 03/09/21 Page 16 of 48
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`
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`a home are reduced. The volume of home transactions has been flat over the past two decades,
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`despite a more-than-twenty-percent increase in the number of households. The increase in the
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`volume of home sales driven by lower transaction costs would spur the creation of new jobs at
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`higher wages for electricians, plumbers, carpenters, and other trades whose demand for
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`services clusters around the purchase and sale of homes. Moreover, states and municipalities
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`that fund their police, fire, and teachers through real estate transfer taxes would benefit from
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`the uptick in sales volume.
`C.
`The Importance Of Internet Aggregator Sites Like Zillow
`
`47.
`
`Since REX launched in 2015, the company has utilized aggregator sites to
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`market clients’ homes. Because many interested buyers start their home search on aggregator
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`sites, these digital hubs are a critical channel for REX. Because REX markets directly to
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`cons