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In case anyone had any illusions about the U.S. Department of Justice losing interest in antitrust issues in real estate recently, the federal agency is starting the new year intervening in a now nearly three-years long pocket listing case against the National Association of Realtors.
On Friday, the DOJ filed a request to the U.S. Court of Appeals for the Ninth Circuit asking for an extra two weeks, until Feb. 10, to file an amicus brief in a federal lawsuit filed by Top Agent Network against NAR in May 2020 over the trade group’s controversial policy designed to curtail pocket listings.
The filing specifies that the DOJ will be be weighing in either neutrally or on the side of TAN.
The DOJ is currently investigating NAR over the pocket listing policy and other NAR rules. NAR filed a lawsuit in late 2021 seeking to stop that probe. That suit is ongoing.
Attorneys for the antitrust enforcer alluded to this investigation in the filing, noting that “The United States has a currently pending dispute with NAR over a Civil Investigative Demand,” but adding no further details.
The DOJ also noted that it had filed an amicus brief in a similar lawsuit, filed by The PLS, challenging the pocket listing policy. Earlier this month, the U.S. Supreme Court denied NAR’s petition asking the court to review a ruling by the Ninth Circuit allowing the The PLS lawsuit to proceed after a lower court decision threw the case out.
“The United States requires additional time to evaluate whether that [Supreme Court] decision affects how amicus participation might be needed in this [TAN] case to protect competition and consumers,” the DOJ’s filing reads.
The attorneys said in the filing that their request is unopposed by both the plaintiff, TAN, and the defendants: NAR, the California Association of Realtors (C.A.R.) and the San Francisco Association of Realtors (SFAR).
“We cannot speculate regarding DOJ’s actions, however, we believe that the district court properly dismissed this case back in August 2021,” NAR spokesperson Mantill Williams told Inman in an emailed statement.
The suit has been quiet for more than a year, since TAN notified the court that it was appealing a lower court decision tossing its case against the Realtor associations.
TAN’s suit alleges the associations violated a slew of antitrust and unfair competition laws for adopting the Clear Cooperation Policy, which requires listing brokers to submit a listing to their multiple listing service within one business day of marketing a property to the public.
The rule is meant to effectively end the practice of publicizing listings for days or weeks without making them universally available to other agents. Some MLSs have instituted hefty fines to enforce the policy, including SFAR.
“We are not surprised that the Clear Cooperation Policy has attracted the attention of the DOJ,” TAN CEO David Faudman told Inman in an emailed statement.
“The policy is both anti-competitive and simply not working. Yet, the NAR is stubbornly refusing to acknowledge that. We are confident the Ninth Circuit Court of Appeals will reverse the lower court’s order so our lawsuit can proceed on the merits.”
NAR’s Williams told Inman on Monday that the policy ensures real estate brokers and agents serve the best interest of consumers and promote equal opportunity for all.
“The CCP advances equal access and opportunity in housing by ensuring listings are widely available and accessible to all consumers,” Williams said.
“Without the protections from the CCP, consumers would be disadvantaged because agents could refuse to give agents or customers access to those listings.”
Also on Friday, TAN submitted its opening brief in its appeal. In the filing, the company maintained that NAR’s policy restricts consumer choice.
“Not all home sellers wish to list their home on an MLS … as it initiates a hectic, fast-paced, expensive home sale process that can permanently damage the home’s value if managed improperly,” attorneys for TAN wrote.
“Other sellers wish to avoid public listings and mandatory home viewing requirements, including celebrities or public figures as well as individuals with personal or situational desire for privacy (e.g., a home sale connected with a divorce).
“For agents representing such sellers (or buyers seeking to be their counterparties), [TAN] is one of a number of services, groups and platforms that offers an alternative channel to list and market homes ‘off-MLS.’”
Moreover, the company alleged that the CCP was intended not to ensure listings are widely accessible to consumers, as NAR maintains, but in order to safeguard NAR’s business model, which relies on association dues revenue from agents, many of whom primarily join Realtor associations in order to access MLSs. NAR has nearly 1.6 million members.
To illustrate this, TAN’s attorneys pointed to an exception in the policy that allows office exclusives, meaning that agents are not required to submit a listing in a Realtor-affiliated MLS if they market it within their own brokerage. This exception has been controversial because it allegedly favors large brokerages.
“The exception ensured that ‘off MLS’ marketing would continue, but only within large brokerages that typically mandate NAR and MLS membership for all employees — and thus do not threaten NAR’s dominance,” TAN’s attorneys wrote.
“Since the Policy took effect in May 2020, ‘off-MLS’ marketing and the sequestering of listings within brokerages has only increased.”
For example, the brief asserted that a study had found that 45 percent of Compass listings in the San Francisco Bay Area were withheld from the MLS as office exclusives.
The brief argued that the office exclusives exception is a greater risk to consumers than other off-MLS marketing channels because “the same brokerage firm represents both buyer and seller, creating an inherent conflict of interest.”
In addition, the brief contended that this exception means that sellers who wish to sell their homes off MLS are restricted to the small share of agents employed by large brokerages.
“Consumers selling homes must choose between listing a home on the MLS, or selling their home through a Realtor at a large brokerage in a conflicted, self-dealing negotiation,” the brief said.
“And consumers buying homes must also hire a conflicted, self-dealing agent at a large brokerage to acquire any properties not listed on the MLS.”
The policy’s “intended and actual effect” is to prevent agents from competing against each other through non-MLS marketing channels, according to TAN’s brief.
“This restraint has damaged the market for property listing services by reducing agent choice and available product quality, raised barriers to entry for new entrants, and restricted agents from engaging in competition with regard to the tools they use to market client properties,” the brief said.
The brief also faulted the reasoning behind the district court’s dismissal of TAN’s suit. In that ruling, Judge Vince Chhabria said TAN’s complaint had laid out “a reasonable argument” that the Clear Cooperation Policy “is so broad that its overall effect on the market for homes is anticompetitive.”
But he suggested that Top Agent Network was the wrong plaintiff to bring an antitrust suit over the policy because its business model, which restricts membership to the top 10 percent of agents in a market by sales volume, is itself anticompetitive. (TAN says it has about 10,000 members in 31 chapters nationwide.)
Because of Top Agent Network’s exclusivity, when a seller lists a home with one of its agents without listing it in the local MLS, it’s reasonable to infer that competition for that home is decreased, according to Chhabria.
But TAN’s appellate brief argued that the district court “adopted as fact NAR’s self-serving arguments and justifications regarding the market impacts from the Policy and from businesses such as TAN’s, ignoring directly contradictory allegations” in the complaint.
The brief alleged that 10 percent of licensed agents are responsible for 90 percent of home sales and therefore limiting TAN’s membership to those “meaningfully active” licensees “improves the value of its network for subscribers, who come to the service to engage with other practicing real estate professionals.”
Finally, the brief also reiterated arguments the Ninth Circuit had found persuasive in the similar The PLS case.
“Just as it did in the PLS.com matter, the Court should therefore reverse the District Court’s order of dismissal,” the brief said.