While the National Association of Realtors (NAR) certainly had cause to celebrate last Wednesday when Judge Timothy J. Kelly of the U.S. District Court for the District of Columbia ruled in its favor in the reopened Department of Justice antitrust investigation, the trade group isn’t out of the woods just yet.
Despite the judge’s verdict, NAR still faces multiple antitrust suits filed by private parties, some of which the DOJ has already intervened in — and appears that the DOJ will continue its involvement in them. Just days before Kelly’s verdict was announced last week, the DOJ asked to submit an amicus brief in Top Agent Network’s suit regarding NAR’s Clear Cooperation policy.
In addition, it remains to be seen if the DOJ will appeal Kelly’s decision.
“It is a great American pastime to never accept any court decision until you have finally been shut down by the U.S. Supreme Court. So, in short, yes, I do expect the DOJ to appeal the decision,” Steve Murray the co-founder of RealTrends Consulting, said. “They will take it to a Federal Appellate court, and the court will have to decide if the judge made a mistake in his judgement.”
Although Murray is certain NAR’s DOJ antitrust woes are far from over, he believes Kelly’s verdict will help NAR in the other antitrust lawsuits the trade group faces.
“This is a very positive development for these class action cases for NAR,” Murray said. “You’ve got the major antitrust investigative Federal authority saying they found nothing wrong. I am glad to not be an attorney on the plaintiff’s side and having to tell the jury that after two years of investigation, the DOJ found nothing wrong, but we are still going to make a case for ourselves.”
Rob Hahn, a managing partner at 7DS Associates, feels differently.
“I don’t see this having any impact on the other lawsuits because they are all civil lawsuits, and whatever a judge decides in an administrative law case shouldn’t have any impact,” Hahn said. “If anything, the impact could be a little negative because now the plaintiffs could get up and ask why NAR is so afraid of transparency? Why were they so desperate to avoid investigation that they sued the Department of Justice? Like who does that?”
In addition, Hahn also said it is important to remember what exactly NAR “won” in the verdict of the lawsuit.
“NAR is not winning something substantive over the DOJ,” Hahn said. “This isn’t NAR going to the judge and saying, ‘The Department of Justice is saying that our rule is anticompetitive and they are wrong. It is actually good for consumers,’ and them winning that case. But this is NAR going to the judge and saying, ‘The DOJ wants to investigate us, please stop them.’ This is a very different kind of victory.”
Hahn, however, agrees with Murray’s assertion that the DOJ will certainly appeal the decision, but he is uncertain of what the outcome may be.
“What I find interesting [about the decision] is that the court never once mentions the Tunney Act,” Hahn wrote in his NotoriousVIP newsletter. “The Tunney Act is federal law that requires judicial review of consent decrees and settlement agreements in antitrust cases. The general takeaway from all of the Tunney Act commentaries and cases is that a settlement entered into by the DOJ (or frankly, any government agency as we’ll see shortly) isn’t worth the paper it’s written on until a judge signs off on that settlement. In this case, the DOJ wants the court to NOT approve any settlements, says we didn’t have a deal… and the court says ‘Sorry, you had a deal.’ What?
“If I understand the court’s reasoning correctly here, it is saying that despite the fact that the court would have had to reject the consent decree — you know, the actual Proposed Final Judgement that had all kinds of requirements for NAR — for failure to comply with the statutory requirements of the Tunney Act… the agreement that NAR and the DOJ reached as an interim step to get to the consent decree is a legally binding contract?” Hahn continued.
At the center of all these antitrust lawsuits is NAR’s Participation Rule and its Clear Cooperation Policy. The Participation Rule requires listing brokers to offer a blanket unilateral offer of compensation to buyer brokers in order to submit a listing to an NAR-affiliated multiple listing service, and the Clear Cooperation Policy requires the listing agent to submit a listing to their local MLS within one business day of marketing a property to the public, eliminating the possibility of pocket listings.
“The MLS is not just the place where all the listings go up and a way to ensure there is uniform data, but it is also a way to manage the relationship between agents and brokers and other parties in the transaction,” Ken Trepeta, the executive director of the Real Estate Services Providers Council, said. “People need to say what they are willing to share of the commission up front in order to avoid this battle later on.”
Trepeta added that he feels the Clear Cooperation Policy was put in place to try and constrain pocket listing practices and keep the playing field level for all agents and brokers.
While Trepeta is confident the DOJ will appeal and the other antitrust lawsuits will continue as scheduled, he is optimistic about NAR’s chances.
“The whole idea that this is some kind of nefarious way to keep commission rates high just doesn’t add up,” Trepeta said. “As it has gotten more and more competitive out there, commissions have become more and more negotiable, and you don’t have to pay it if you don’t want — just select the firm or agent that allows you to do what you feel comfortable with. There is certainly no evidence that there is a conscious effort to preserve a certain level of commission. I have been involved in this industry for over 30 years and prices have gone up, but commission rates have generally not.”
