This error occurs when attempting to connect in an unsupported manner with Docker.
Typically this is the use of localhost or loopback addresses which aren't supported due to the containerization and the IP address or FGDNs instead need to be supplied.
Additionally if the first server instance is not defined in the CLI, it's assumed that it is local. This would normally be syntactically valid as the missing parameter is being implicitly passed anyway.
sqlcompare /server2:Widget_Server\SQL2016 /db1:WidgetStaging /db2:WidgetProduction
However in a Docker environment, this will fail because the implicit value (localhost) is unsupported.
Please see the requirements for using the CLI with Docker, especially the requirement to escape \ characters.