MLS "no-commingling" Rule Back Under Threat After DOJ Weighs in on Zillow vs REX Case

In a move that could have important ramifications for the industry, the U.S. Department of Justice (DOJ) has published a brief stating that it believes discount brokerage REX is entitled to a retrial against Zillow and the National Association of Realtors (NAR).

The government department has called into question a district court decision from earlier this year which saw REX denied a retrial in its long-running dispute against the portal company. The DOJ's statement argues that “The judge’s decision created a loophole that could allow associations to sidestep antitrust scrutiny by cloaking restrictive rules as optional".

The case now hinges on the Ninth Circuit Court which deals with appeals. The court may decide to send the case back to the district court for a re-hearing which would have much of the U.S. real estate industry looking on...

Background and implications

In 2021 Zillow switched from ingesting its listings using many feeds from individual MLSs to a so-called 'IDX feed'. The IDX feed is a privilege that Zillow has access to thanks to its status as a paid-up brokerage member of MLSs and the NAR.

While the switch to an IDX feed helped Zillow's back-end processes become more efficient it also came with a set of rules imposed by the NAR that the portal was obliged to adhere to. Sites like Zillow that use the IDX feed must display members' listings separate from non-members' listings.

This meant that listings from discount brokerages such as REX (who do not pay MLS fees) appeared on the 'other listings' tab on Zillow's results pages—a situation that REX argued, disadvantaged them and stifled competition.

Although Zillow actually said that it was against the NAR policy, it was obliged to comply with the "no commingling" rule and as a result spent years fighting REX in court.

The entangled legal spat between the parties involved in this case is important because if a retrial occurs and REX prevails then Zillow and other U.S. real estate marketplace sites may be forced to change how they display listings from sources such as discount brokerages and FSBO which do not pay MLS membership fees.

This could lead to increased viability for discount business models such as that of REX and more Americans choosing to forgo the services of an agent and list their home for sale themselves.

Although REX went out of business its co-founder Lynley Sides expressed optimism about restrating the case against Zillow and NAR.