Real Estate

Federal Court Rules In Favor Of NAR In Longtime DOJ Probe

District court judge sets aside DOJ demand for information from the NAR on buyer broker commission and pocket listing rules.

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A federal court on Thursday ruled in favor of the National Association of Realtors in a case seeking to enforce a settlement agreement between the trade group and the U.S. Department of Justice.

The ruling, which can be appealed, sets aside the DOJ’s request for information from NAR on rules regarding buyer broker commissions and pocket listings, among others.

It’s unclear at this point what the ruling means for the DOJ’s investigation into NAR’s policies. The DOJ did not immediately respond to a request for comment.

“This does not preclude the DOJ from investigating NAR in the future, and the DOJ has the option to appeal this decision if desired,” NAR said in a statement on the California Association of Realtors website.

“But this is a clear victory, and NAR is delighted the DOJ is now bound to honor its agreement.”

In 2019, the DOJ sent NAR a civil investigative demand (CID) over several of its rules. The parties came to a settlement while the DOJ was under the Trump administration but after the Biden administration took over, the agency abruptly withdrew from that settlement agreement on July 1, 2021.

Days later, the agency sent NAR another CID seeking new information on two of the the trade group’s rules:

  • the Participation Rule, which requires listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing into a Realtor-affiliated MLS, and,
  • the Clear Cooperation Policy, which requires listing brokers to submit a listing to their Realtor-affiliated MLS within one business day of marketing a property to the public

In September 2021, NAR  filed a petition attempting to quash the DOJ’s demand, contending NAR only agreed to the settlement after assurances that it would receive a letter affirming the DOJ had closed its investigations into the Participation Rule and Clear Cooperation Policy. The DOJ subsequently sent that letter.

On Wednesday, Judge Timothy J. Kelly of Washington D.C.’s district court granted NAR’s petition, ruling that the demand violated the “validly executed settlement agreement” between the two parties.

“At bottom, not setting aside the CID at issue would deprive NAR of the benefit for which it bargained: the closure of the Antitrust Division’s investigation into its Participation Rule and Clear Cooperation Policy,” Kelly, a Trump appointee, wrote in a memo accompanying the order.

“The government, like any party, must be held to the terms of its settlement agreements, whether or not a new administration likes those agreements. For this reason, the CID at issue must be set aside.”

Kelly, however, did not rule out future investigations against NAR or even of the rules at issue if NAR were to change the rules or the way it enforces them.

“None of this is to say that the Antitrust Division has agreed to never investigate NAR or some future version or application of NAR’s Participation Rule and Clear Cooperation Policy,” Kelly wrote.

“The Court holds only that the government, in committing to close an investigation into these policies one year and then reopening it the next — when the only intervening change was that in presidential administrations — violated the parties’ agreement. For that reason, the CID issued to further that investigation must be set aside.”

Mantill Williams

In an emailed statement, NAR spokesperson Mantill Williams told Inman, “We are pleased the court has granted our petition to set aside the Department of Justice’s (DOJ’s) action and agree it is a violation of the executed settlement agreement.”

“NAR guidance for local MLS broker marketplaces has long been recognized to ensure fair, transparent and competitive real estate markets for consumers and businesses,” he added.

The rules at issue in this case are the subject of multiple antitrust lawsuits filed against NAR filed by private parties, some of which the DOJ has intervened in. No matter what happens with the DOJ’s investigation, those lawsuits are ongoing.

“The court’s decision will limit DOJ’s ability to investigate anti-competitive industry policies costing consumers billions of dollars annually,” Stephen Brobeck, senior fellow for consumer watchdog the Consumer Federation of America, in an emailed statement.

“These policies are related to the inability of homebuyers to negotiate buyer agent commissions that are directly paid by listing agents and their seller clients. Multiple listing services require listing agents to offer non-negotiable commissions to buyer agents in MLS home listings, which helps explain why research has shown that commissions are high and relatively uniform.

“The reform of this anti-competitive policy must now come from courts in Illinois and Missouri that are deciding class action lawsuits against NAR and many large real estate firms.”

CFA has pushed for a ban on homesellers offering buyer agent commissions, arguing the practice constitutes “unfair restraint of trade.” NAR maintains that commissions are and have always been negotiable and that commissions are set by the market.

Editor’s note: This story has been updated with a comment from CFA.

Email Andrea V. Brambila.

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