CoStar Hit With Class-Action Suit Claiming It's A Monopoly That 'Destroyed Competition'
A boutique New York-based brokerage sued CoStar Group on Tuesday in a class-action lawsuit that accuses the website of monopolizing the online commercial real estate listing space.
Grand & Co., based in Brooklyn with a website that says it puts “people over transaction,” accused CoStar of violating regulations in the Sherman Act around anticompetitive business practices by unlawfully preventing its customers from working with or using competing services.
The complaint says CoStar controls roughly 80% of the market for internet-based commercial real estate listings and information and that it leverages its position to raise barriers to entry to the marketplace while stifling competition, harming thousands of brokers who rely on digital marketing to promote their listings.
Attorneys for Grand & Co. wrote in the introduction to its lawsuit that CoStar is known across the industry as a bully that brokers have no choice but to work with.
“This is a rare case about a company that has perpetrated an anticompetitive scheme so pernicious that its own customers openly lament how it has destroyed competition, leaving them no choice but to pay its supracompetitive prices,” the attorneys from Dicello Levitt wrote.
CoStar denies the allegations and pointed to the existence of Crexi as proof that brokers have options for where to list properties. A CoStar spokesperson pointed out that Grand & Co. had used Crexi as well as CoStar for its own listings.
“This lawsuit is an embarrassment,” the spokesperson said in a statement. “The entire premise of the complaint is that brokers are ‘locked’ into using CoStar’s LoopNet and ‘locked out’ of competing platforms — yet the plaintiff broker himself actively lists his brokerage’s properties on a major CoStar competitor’s site.”
Crexi is also suing CoStar over antitrust claims. CoStar asked the Supreme Court to review a previous decision allowing the case to proceed, but the high court declined to take up the review in March.
The 79-page Grand & Co. complaint outlines past lawsuits filed against competitors by CoStar, including the Crexi litigation and the 1999 lawsuit against LoopNet that presaged its 2011 acquisition by CoStar for $860M. The acquisition created what the complaint describes as “the dominant CRE listing services provider in the United States.”
The suit requests that the court recognize the filing as a valid class action and requests a jury trial to determine the damages to be paid.
“This scattershot complaint lazily recycles debunked claims that make no sense,” CoStar General Counsel Gene Boxer said in a statement. “CoStar customers are free to share their own listings on other platforms, as our written terms of use make crystal clear.”
Among a raft of allegations in the suit is the accusation that CoStar requires its clients to purchase subscriptions, ranging from $300 to $1K per month, for all of their brokers, regardless of whether they will all use the platform.
It also accuses CoStar of engaging in a scheme that involved “coercing the three largest CRE brokerages in the country,” which the suit identifies as CBRE, JLL and Cushman & Wakefield, “into long-term exclusive deals and naked agreements not to compete with CoStar in the Internet CRE listing and information services market.”
CoStar denied the allegation, with Boxer saying its contracts include “standard covenants that simply provide that customers can’t use what we provide to compete against us.”
“That’s a clause that could hardly be more common or reasonable,” he added.
