The real estate industry is not lacking in antitrust lawsuits. But while industry professionals await the results of the suits against the National Association of Realtors, Zillow has just dodged legal trouble of its own.
A lawsuit alleging that Zillow violated the Lanham Act and the Vermont Consumer Protection Act due to use of deceptive tactics in its for-sale-by-owner listing services and advertisements was dismissed last week by a federal judge in Vermont.
The suit was filed in January 2021 by Picket Fence Preview, Inc., a for-sale-by-owner listing site operating in Vermont and New Hampshire. The case was initially dismissed in August 2021, but Picket Fence appealed the decision. Zillow filed a motion to dismiss the case a second time in May 2022.
Zillow allows homeowners to list their for-sale-by-owner properties on the site for free, However, Picket Fence alleges that the listing service is not necessarily free. Picket Fence claims that instead of directing a potential homebuyer viewing a for-sale-by-owner property on the site to the current homeowner listing the property, it instead puts them in contact with a Zillow Premier Agent. The complaint goes on to state that agents who have signed up for Zillow’s Premier Agent lead generation system would receive these leads.
“Zillow claims it is offering a service for free, but in reality is charging the Premier Agents so they can advertise on the website of those free ads and receive hijacked inquiries from deceived buyers,” the complaint states.
“When a For-Sale-By-Owner has a listing on Zillow’s service, the initial page that a potential buyer sees is a big bar below that says ‘Contact Agent’ prominently displayed. To find the seller’s contact information a potential buyer must go to ‘Get More Information.’ When the section listing ‘Get More Information’ on a For-Sale-By-Owner page comes up, the ‘Premier Agents’ are listed first and the owner is listed at the bottom of the list.”
In order to locate contact information for the homeowner selling the property, Picket Fence states that homebuyers much scroll through the entire “more information” tab on the listing.
In addition, Picket Fence alleges that there is a link on for-sale-by-owner advertisements on Zillow informing Premier Agents how to pay to get their names on the listing or be the only contact on the listing.
“If one were to press the ‘Contact’ button, the person is then contacted by an Agent or Zillow, not the Property Owner,” Picket Fence wrote in the complaint.
District Judge Christina Reiss granted Zillow’s motion to dismiss the case, stating that Picket Fence does not plausibly plead a VCPA lawsuit, as Zillow’s practices “do not preclude consumers from advertising with multiple FSBO listing services simultaneously. They do not foreclose access to Plaintiffs services or to the marketplace, nor do they allegedly cause consumers to pay higher prices. Accordingly, while Plaintiff plausibly alleges competitive harm to itself, it does not plausibly allege present or future harm to consumers or competition through a FSBO seller’s use of Defendant’s website,” Reiss wrote.
Picket Fence’s Lanham Act claim was dismissed on similar grounds, with Reiss stating: “The Plaintiff has not identified a statement made by Defendant that is ‘either literally or impliedly false.’”
“We are pleased with the District Court’s decision to dismiss the complaint with prejudice,” a Zillow spokesperson wrote in an email. “We strive to serve as a fair and open online marketplace by providing consumers with access to the most information available about residential real estate, which includes giving homeowners the option of using for sale by owner (FSBO) postings on our site for free.
“Additionally, as part of our mission to empower all consumers, our site provides shoppers with tools that help them find their next home such as the option to connect directly with the seller of a FSBO or a real estate professional.”
Picket Fence has until Sept. 23 to appeal the court’s decision, which it said it plans to do.
“Like with any antitrust suit, Zillow is using their monopoly power to squash competitors and hurt competition and hurt consumers,” Bill Supple, a co-owner of Picket Fence, said. “The Lanham Act portion of our case is very significant because it has to do with false advertising and that is what Zillow is doing.
“It is offering for sale by owner ads to the public that are not for sale by owners because they violate the definition of what a for sale by owner is. In our specific case, the judge had some incongruous ruling that said basically Zillow has never claimed to be offering a for sale by owner ad, yet in all of the screenshots and the material we submitted, it clearly starts ‘post your for sale by owner ad on Zillow,’” Supple said.
Supple said Picket Fence hopes to work with a more understanding judge in their appeal.