11 Jul Realogy Sues Compass Alleging Antitrusts Violations
There are a few articles on this, some behind paywalls. I am curious what your thoughts are on this matter. I have also found the source filing and provided information so you can search and interpret it yourself.
A few key details TLDR: The claims state that allegedly Compass engaged in illegal and unfair practices, such as:
- collusive solicitation to engage in price fixing
- intentional circumvention of non-compete clauses for corporate employees
- hostile takeovers with predatory pricing
- false libelous claims from recruiters to agents that Realogy is about to go bankrupt
- unauthorized access to Realogy's proprietary databases such as LEAR**
- getting poached agents to change Realogy listings as 'sold' before leaving for Compass, and then relisting those same homes on Compass's site after switching.**
Obviously there are people here from Compass, Realogy, Independent Brokers that have been solicited by Compass, and various other competing brokerages.
Do you have any first hand experience with Compass? Were they positive or negative?
What's your take on the matter? Do any of these claims hold water?
*Reformatted TLDR for Readability
– Tangentially related, but this is an interesting analysis of Compass: https://www.mikedp.com/articles/2019/5/1/inside-compass-part-1-growth-strategies
Edit: I now have a copy of the filing, so I am going to fill in some additional details:
- The Lawsuit is taking place with the Supreme Court of the State of New York
- You can search the case here: https://iapps.courts.state.ny.us/nyscef/CaseSearch
- The Case Number for the case is 653927, obviously the year is 2019
- **Additional cases referenced substantiating the claims of unauthorized access and manipulation of Reology Listings are Cases 650912-2015 and 652462-2014, both filed in the state of NY
- **There are also various other cases referenced from other other non Realogy affiliated, NYC competitors suing Compass for stealing confidential information and manipulating proprietary data
- A case in California is referenced (Zephyr Real Estate vs Urban Compass, Case# CGC-18-568835) where Compass allegedly violated a nondisclosure agreement between the two parties and used the information they gained to poach employees and agents from Zephyr
- The suit states in the Facts that Compass poached at least 20 senior salaried employees on Realogy, including Branch Mangers and Vice Presidents, whom were all subject to non-soliciation agreements and/or restrictive convenants
- In the facts, it goes into detail the process by which Compass would intentionally circumvent non-competes – they would grant a 'National Title' to the Employee but have them still operate, recruit, and control the same Region they were previously working in, but may be temporarily be located remotely until the term of the non-compete expired, upon which their Title converted into a State or Regional title and they were relocated back to their original area.
- Similarly, a strategy that has also occurred to circumvent non-competes is to hire a key Realogy employee for one title, but then have their job duties be entirely different – with those duties being managing Compass offices and recruiting agents.
- After purchasing a Realogy franchise that was 2 year's into its 10 year franchise agreement, Compass rebranded the website but allegedly purposefully left references to the Realogy franchise in the source code of the website for SEO.
- Realogy also accuses Compass of various false claims, one of those examples include a Compass recruiter in May 2019 claiming that Realogy had plans to close the prospective recruit's branch office, a claim that Realogy says was fabricated, and that if it weren't, would indicate possession of confidential information.
- Another false claim allegedly made is a commissioned report from Compass that claims that according to objected third-party research Compass agents grow their business by 20-40% in their first year of switching to Compass. However, the report only included seven agents, and analysis done by Realogy indicates that their Realogy-affiliated agents experience a 'significant decrease in their business in their first year at Compass'.
- Additional research done by other competitors nationally indicates a decline of productivity in the first six months that an agent goes to Compass.
- Another alleged false claim is the boast by Compass that they "build all of its own technology and end-to-end real estate services platforms", as per a quote from Robert Refkin: "we build everything in house, and all the tools and support is in house". Furthermore, these exclusive in-house technologies are allegedly used to justify the high valuation multiple for Compass. However, the suit states that Compass's statements are false, as they purchased CRM software maker Contactually rather than develop an in-house CRM, and that they use third-party tech providers such as MailChimp and Mopro.
- A substantive false claim, if proven to be true, is the promise to agents that "they will get paid on a multitude of referrals, including for title and mortgage services", which is patently provably a false promise because those payments constitute a kickback under RESPA (Real Estate Settlement Procedures Act).
- Flouting REBNY rules, such as soliciting home owners/sellers to terminate exclusive listings with Corcoran to convert into Compass exclusive listings, advertising and disseminating Corcoran exclusive listing's on Compass's website as if they were Compass listings, and the previously referred manipulation of Corcoran's proprietary listing database
- Details about the REBNY violations include Compass purposefully misleading homesellers that they have to cancel listings when an agent moves to Compass, and written evidence from an agent recruiter acknowledging to the potential recruit that Compass will pay a fine on the listings they are poaching from Corcoran
For reference, while there are indeed limitations to non-competes, if they are within a reasonable Geographic area or for work of a substantially different nature, or after a reasonable amount of time then it is acceptable. However, the substance of the case discussing noncompetes is that Compass had employees effectively working in the same locations or managing the same locations they were at before, and their job duties were substantially the same.