BREAKING NEWS — DOJ files Statement of Interest in NAR Settlement lawsuit

At the last minute before the November 26 final hearing for Judge Bough’s Final Approval of the proposed NAR Settlement in the Sitzer-Burnett civil class action case, the Department of Justice (DOJ) filed a Statement of Interest (SOI). Here on The Data Advocate we had predicted that the DOJ would file a SOI by the end of October – we were off a month.

We first heard the DOJ news from Tristan Ahumada this November 24 evening on his Brilliant Tribe website

Although the DOJ filing is short, it nevertheless offers us a much clearer insight into the DOJ concerns regarding antitrust behavior in the real estate industry. You will find the complete 7-page filing here DOJ Statement of Interest

Key Points in DOJ SOI in NAR Settlement with citations included:

The United States continues to scrutinize policies and practices in the residential real-estate industry that may stifle competition. It is a matter of public record that the United States has an open investigation into these practices. See NAR v. United States, 97 F.4th 951 (D.C. Cir. 2024) (discussing United States’ investigation into NAR’s rules and practices), petition for cert. filed (Oct. 15, 2024) (No. 24-417). Competition in real estate is critical, and home ownership is a key component of the wealth of American households.
The proposed settlement includes a provision requiring buyers and their brokers enter “written agreement before the buyer tours any home.” Dkt. 1458-1 ¶ 58(vi). This provision itself raises independent concerns under the antitrust laws, which could be addressed in multiple ways. The parties could (i) eliminate the provision or (ii) disclaim that the settlement creates any immunity or defense under the antitrust laws. Alternatively, the Court could clarify that approval of the settlement affords no immunity or defense for the buyer-agreement provision.
The class actions before the Court challenge blanket unilateral offers of compensation to buyer brokers. This pervasive industry practice harms both sellers and buyers. Sellers feel tremendous pressure to offer the “customary” rate of 2.5-3% to buyer brokers, lest those buyer brokers “steer” their clients to higher-commission properties. See United States’ Statement of Interest, Nosalek v. MLS Prop. Info. Network, Inc., Dkt. 290 at 13, 1:20-cv-12244 (D. Mass. Feb. 14, 2024). This practice does not benefit buyers, who must foot the bill through higher home purchase prices, regardless of the extent or quality of their brokers’ services or whether they would have otherwise been willing to pay for those services at all.
Listing brokers, who represent sellers, effectively decide the total commission and, as a general matter, split it with buyer brokers, insulating buyer brokers from meaningful competition, foreclosing meaningful negotiations between buyer brokers and their clients, and decreasing the incentive for brokers to offer improved or lower-cost services. See Burnett v. NAR, No. 4:19-CV-00332-SRB, 2022 WL 17741708, at *8 (W.D. Mo. Dec. 16, 2022).
Under the proposed settlement, NAR would prohibit brokers from making these offers on the MLS itself. The proposed settlement, however, expressly allows offers of compensation to continue and for them to be posted publicly; it simply prohibits making these offers on an MLS. See No. 1458-1 ¶ 58(ii), (iii). The proposed settlement also introduces a new NAR rule that requires buyers and brokers to enter a “written agreement before the buyer tours any home.” Dkt. 1458-1 ¶ 58(vi).
Thus, while the Court may ultimately find that the proposed settlement achieves important concessions in the interests of the private actors in this litigation and satisfies Rule 23(e), such determination does not mean that the proposed settlement effectively prevents or restrains ongoing antitrust violations or remedies past violations, or itself contemplates practices that fully comply with the antitrust laws. Because the United States did not participate in either the underlying litigation or the proposed settlement, that settlement does not preclude any future enforcement actions by the United States, and compliance with the proposed settlement or new NAR rules implementing that settlement affords no defense to any such enforcement actions.
In addition, the new provision that requires buyers and brokers to make written agreements before home tours may harm buyers and limit how brokers compete for clients. It bears a close resemblance to prior restrictions among competitors that courts have found to violate the antitrust laws in other proceedings and could limit — rather than enhance — competition for buyers among buyer brokers. See, e.g., FTC v. Ind. Fed. of Dentists, 476 U.S. 447, 459 (1986) (condemning an agreement among competitors “to withhold from their customers a particular service that they desire”); RealComp II, Ltd. v. FTC, 635 F.3d 815 (6th Cir. 2011) (condemning an agreement that prohibited information useful to consumers from being distributed through MLS feeds to public websites).
In its recent filing, Plaintiffs argued that the settlement does not require a representation agreement for a specific time period. See Plaintiffs’ Motion and Suggestions in Support of Final Approval, Dkt. No. 1595 (Nov. 20, 2024) at 42. Regardless, buyer brokers under the proposed rule may not show a house, even a no-obligation showing, without first obtaining a written agreement. Thus, the concerns remain that the broker agreement rule may limit how brokers compete, and there is no record available in the current posture addressing this concern. It is therefore important that any settlement not purport to preclude future antitrust scrutiny.

GAME ON — Here’s the NAR Response to the DOJ Filing

NAR Response to DOJ Statement Sitzer Nov 2024

Where can I buy tickets for this great show to hear the DOJ attorneys appear in person to make their case to Judge Bough, who had previously denied a request by a Buffalo contract law professor to appear digitally. The Plaintiffs attorneys are expecting a payday of over $300 Million.

BREAKING NEWS — DOJ files Statement of Interest in NAR Settlement lawsuit