Late last year, with great fanfare, the US Department of Justice announced the settlement of a lawsuit it had filed against the National Association of Realtors (NAR).
In that lawsuit, the DOJ accused the NAR of engaging in various practices that the DOJ considered anti-competitive and in violation of the Sherman Act, the federal law that prohibits monopolies and other antitrust activities. In an unusual move, the DOJ announced the settlement of the lawsuit at the same time as it announced the filing of the lawsuit – on November 19.
As the DOJ noted in its complaint, the NAR is a national trade association that significantly controls how residential real estate is bought and sold. It exercises this control by requiring more than 1,400 local associations of real estate brokers who belong to it, as well as the individual brokers who belong to these associations, to respect its rules. Failure to follow these rules risks expulsion, in which case the benefits that the NAR offers to its members (for example, a malpractice insurance program) could be lost.
One of the goals of the DOJ’s lawsuit against the NAR came from the fact that real estate brokers representing buyers are normally paid by real estate brokers representing sellers. This is because the seller’s broker agrees to pay a broker producing a buyer for the seller’s property a share of the commission that the seller has agreed to pay to the seller’s broker.
According to the DOJ lawsuit, this arrangement has sometimes led to abuse. For example, brokers representing a buyer would tell the buyer that they were working “for free” since the buyer had no legal obligation to pay a commission. Additionally, according to the DOJ lawsuit, brokers representing buyers sometimes play with multi-listing systems operated by local real estate brokerage associations (under rules set by the NAR) by showing buyers only properties with the highest commissions payable by the seller’s broker to a broker representing a buyer.
But, in another unusual move, on July 1, the DOJ (now taking its orders from the Biden administration and not former President Donald Trump) withdrew from the settlement, which it apparently had the right to do. make. The Department of Justice press release announcing the change in leadership of the new sheriff in town said the regulations “did not sufficiently protect the ability of the antitrust division to pursue future claims against NAR.”
The DOJ press release also said that the department had “sought agreement from NAR to amend the regulations in order to adequately protect and preserve the rights of the department to investigate and challenge further conduct by NAR, but the department and NAR were unable to reach an agreement. Since the settlement only addressed some of the department’s concerns about NAR rules, this step ensures that the department can continue to enforce antitrust laws in this important market.
Unsurprisingly, the NAR was unhappy with this turn of events and called the DOJ’s withdrawal from the regulations “a complete and unprecedented violation of the agreement.” The NAR added: âWe are confident in our policies in favor of consumers and competition. “
So the DOJ’s long-running campaign to restrict the NAR’s control over how brokers handle residential real estate transactions is back on the starting line and DOJ lawyers are likely hard at work on a retrial. in pursuit of a greater victory.
Jim Flynn works for Flynn & Wright LLC of Colorado Springs. You can contact him at [email protected]