The Department of Justice (DOJ) filed a lawsuit against the National Association of Realtors (NAR) on Thursday, alleging a series of violations of antitrust law, including commission arrangements and consumer disclosure requirements.
NAR has adopted a “series of rules, policies, and practices governing, among other things, the publication and marketing of real estate, real estate broker commissions, as well as real estate broker access to lockboxes, that have been widely adopted by NAR’s members resulting in a lessening of competition among real estate brokers to the detriment of American home buyers,” the DOJ said in a news release on Thursday.
The federal government alleged that the Chicago-based trade organization violated the Sherman Act and “restrained” free trade by:
- “prohibiting NAR-affiliated multiple-listing services (“MLSs”) from disclosing to prospective buyers the amount of commission that the buyer broker will earn if the buyer purchases a home listed on the MLS;
- allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free;
- enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential home buyers;
- and limiting access to the lockboxes that provide licensed brokers with physical access to a home that is for sale to only brokers who are members of a NAR-affiliated MLS.“
Because the practices have been widely adopted by NAR-affiliated MLS networks, they are “therefore, agreements among competing real estate brokers each of which reduce price competition among brokers and lead to lower quality service for American home buyers and sellers,” the complaint alleged.
“Buying a home is one of life’s biggest and most important financial decisions,” said Assistant Attorney General Makan Delrahim in a statement. “Home buyers and sellers should be aware of all the broker fees they are paying. Today’s settlement prevents traditional brokers from impeding competition — including by internet-based methods of home buying and selling — by providing greater transparency to consumers about broker fees. This will increase price competition among brokers and lead to better quality of services for American home buyers and sellers.”
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A spokesperson for the realtor trade organization, which boasts 1.4 million members and operates in all 50 states, said its rules and policies “have long sought to ensure fair and competitive real estate markets.
“In response to questions from the U.S. Department of Justice, we have been working to explain our rules. We have reached an agreement that fully resolves the questions raised by the DOJ about the MLS system and commissions,” spokesperson Mantill Williams said in a statement to HousingWire. “Most of the changes seek to more explicitly state what is already the spirit and intent of NAR’s Code of Ethics and MLS Policies regarding providing information about commissions and MLS participation.”
Williams said that while NAR disagrees with the DOJ’s characterization of rules and policies, and admitted no liability or wrongdoing, “we have agreed to make certain changes to the Code of Ethics and MLS Policies while we remain focused on supporting our members as they preserve, protect and advance the American dream of homeownership.”
NAR likely won’t have been caught entirely by surprise by the lawsuit. The trade organization has been fighting multiple antitrust lawsuits in recent years, including over buyer-broker commissions and pocket listings.
NAR also reached an agreement in 2008 with the DOJ to stop blocking web listings.
Stay tuned for updates on this breaking news story.