A coalition of 19 consumer advocacy groups, including the Consumer Federation of America, American Economic Liberties Project and Open Markets Institute, has sent a letter to the National Association of Attorneys General asking state attorneys general to investigate a broad range of practices involving Zillow, Compass and other major players in the real estate industry. The September 16 letter goes well beyond the ongoing battle between Zillow and Compass over private listings. It raises questions about referral fees, the way online portals route consumers to agents, mortgage relationships, private listing networks, dual representation and the increasing concentration of power among a relatively small number of companies.
To me, that last point is what makes this letter worth paying attention to. We have spent the past several years talking about competition, transparency and giving consumers more control over what they pay for real estate services. Yet at the same time, more of the real estate transaction is becoming dependent upon large national platforms and companies that control access to consumers, listings or both. The consumer groups describe the market as a series of “toll booths,” with companies controlling different chokepoints in the transaction. That characterization is certainly advocacy, but the underlying question is legitimate: Are we actually creating a more competitive real estate market, or are we simply changing who controls it?
Zillow is a major focus of the letter. The Federal Trade Commission and five states sued Zillow and Redfin last year over their $100 million rental listing agreement, alleging the arrangement effectively paid Redfin to withdraw as an independent competitor in the multifamily rental advertising market. In August, the FTC reached a settlement requiring significant changes to the agreement and requiring Redfin to rebuild and reenter that market. The FTC said the order was intended to restore competition and remove provisions that restricted Redfin’s ability to compete independently.
There is one statement in the consumer groups’ letter that I think goes too far, however. The letter says Zillow “effectively conceded its conduct was harmful” by settling with the FTC. I would not characterize it that way. The actual stipulated order expressly states that the settlement does not constitute an admission by Zillow or Redfin that they violated the law or that the allegations against them are true. The settlement is significant, and the FTC obviously had serious concerns about the arrangement, but a settlement is not the same thing as an admission of wrongdoing. That distinction matters.
The part of the letter that interests me even more is its focus on real estate referral fees. The groups specifically call attention to the familiar “Contact Agent” buttons consumers see on major real estate websites. According to the letter, consumers may believe they are contacting the agent representing the property when they are instead being routed to an agent participating in the platform’s referral network. The letter says those referral fees can reach 40 percent of the agent’s commission. It argues that this creates another layer of cost and potentially leaves the agent with less ability to compete on price.
I think that is an issue our industry needs to take seriously. There is nothing inherently wrong with one broker referring a client to another broker and receiving a referral fee. That has been part of real estate for decades. What is different is the scale and the economics when a dominant consumer platform positions itself between the consumer and the real estate professional and collects a substantial percentage of the compensation on thousands or potentially millions of transactions. If an agent has already committed 35 or 40 percent of his or her fee to obtain the customer, there is obviously less room remaining to discount that fee to the consumer. After everything the industry has been through over the past few years regarding compensation and competition, that deserves scrutiny.
Transparency is just as important. If a consumer clicks something that says “Contact Agent,” who does the consumer reasonably believe they are contacting? If it is the listing agent, say that. If it is an unrelated buyer’s agent who is paying the website a referral fee for the introduction, I think that should also be clear. Consumers should understand who they are being connected with, whom that person represents and how the business relationship behind that introduction works.
Compass is the other major target of the letter. The consumer groups take issue with Compass’s strategy of privately marketing some listings within its network before, or in some cases instead of, exposing them to the broader public market. They argue that restricting access to listings can reduce the number of buyers who see a property and potentially create opportunities for the brokerage to capture both sides of the transaction. The letter also asks attorneys general to review Compass’s acquisition of Anywhere and whether the resulting concentration reduces competition. These are allegations and arguments by the organizations signing the letter, not findings by regulators or courts.
I don’t believe every privately marketed listing is automatically bad for a consumer. There can be legitimate circumstances in which a seller knowingly chooses limited exposure because privacy, timing or another consideration is more important to them than maximum market exposure. Sellers should have choices. But there is an important difference between a private marketing decision made because it serves a particular seller’s interests and a companywide strategy designed to build proprietary inventory that gives one brokerage a competitive advantage. The question should always be whose interests are driving the decision. If it is truly the seller’s informed choice, that is one thing. If withholding the property primarily benefits the brokerage or platform, that is something very different.
I also take issue with one way the letter describes the 2024 National Association of REALTORS® settlement. It says the settlement was supposed to make buyer agent commissions negotiable. Commissions did not suddenly become negotiable because of the settlement. They were negotiable before it and remain negotiable today. What changed was significant: offers of buyer broker compensation could no longer be communicated through the MLS, many buyers became subject to written buyer agreement requirements before touring homes, and those agreements had to clearly state how the buyer broker would be compensated. NAR’s own settlement materials specifically state that broker compensation remains fully negotiable.
That may sound like a technical distinction, but it is important when discussing competition in real estate. If the goal is greater consumer choice and more meaningful negotiation of fees, then we should be willing to examine every structure that could interfere with that goal. That includes traditional brokerage practices, MLS rules, private listing networks, online portals and referral arrangements. No particular business model should get a pass simply because it is newer or because it presents itself as more consumer friendly.
For St. Louis real estate agents, brokers and consumers, this letter does not change any law or establish that Zillow, Compass or anyone else did anything illegal. It is a request from advocacy organizations asking state attorneys general to investigate. But the groups are specifically calling for a coordinated multistate effort involving consumer protection, antitrust enforcement, referral practices, mortgage relationships and private listing policies. If attorneys general take up that request, the implications could extend well beyond Zillow and Compass.
I have watched the real estate industry’s structure evolve for more than four decades, and one thing has remained consistent: whenever control of consumers, information or distribution becomes concentrated, somebody eventually begins asking whether that control is being used competitively and transparently. Today the players may be portals, mega brokerages and national referral platforms rather than the traditional organizations that previously dominated the industry, but the underlying questions haven’t changed.
The complete September 16 letter from the 19 consumer organizations can be viewed in its entirety here.
