Yes… with a “B”
On October 31, 2023, a federal jury in Missouri returned a verdict finding the National Association of Realtors (NAR) and several large brokerages liable for antitrust violations in a class-action lawsuit filed by home sellers. The case is Burnett et al v. The National Association of Realtors et al, U.S. District Court for the Western District of Missouri, No. 4:19-cv-00332-SRB.
In Burnett, the jury awarded the plaintiffs $1.8 billion in damages, finding that NAR and the brokerages had conspired to artificially inflate commissions by setting rules and policies that made it difficult for sellers to negotiate lower rates. Due to the nature of cases of this type, this award could potentially be “trebled” (tripled) up to approximately $5.4 billion. NAR indicated that it will appeal the decision and so time will tell if this verdict will stand. And while appeals take a number of years to work through the system, this verdict will undoubtedly have an impact on the real estate industry, regardless of the final outcome.
What was at issue?
One of the key issues in the case was NAR’s “clear cooperation” rule. The clear cooperation rule requires listing brokers to submit their listings to their local multiple listing service (MLS). The MLS is a database of listings that is shared by all NAR members. Per the NAR’s handbook on MLS, it is also “a means by which authorized participants make blanket unilateral offers of compensation to other participants (acting as subagents, buyer agents, or in other agency or nonagency capacities defined by law).”
The clear cooperation rule, therefore, ensures that all NAR members have an equal opportunity to sell a listed home, regardless of whether they are the listing broker or not. It also ensures that, if a buyer’s agent finds a home that is listed on the MLS, the buyer’s agent will be entitled to a commission from the seller.
The plaintiffs alleged that the clear cooperation rule forces sellers to list their homes on the MLS, even if they would prefer to sell their homes through other channels. They further argued that it forces home sellers to pay higher commissions than they otherwise would. This, the plaintiffs argued, gives NAR and its members an unfair advantage in the real estate market and drives up commission rates.
The defendants argued that the clear cooperation rule is pro-consumer because it helps buyers find all of the homes that are available for sale in a given area.
The jury found that NAR and the brokerages had violated antitrust law by conspiring to fix prices and restrain trade. The jury also found that the clear cooperation rule was an unreasonable restraint on trade.
Why it matters
The verdict in this case is significant for several reasons. First, it is the first time that a jury has found NAR liable for antitrust violations. Also, the verdict could lead to significant changes in the real estate industry, as NAR’s rules and policies have a major impact on the way that homes are bought and sold.
It is important to note that the verdict is still under appeal, and it is possible that it could be overturned by a higher court. However, the verdict is a sign that courts and juries are willing to scrutinize the real estate industry and hold it accountable for anticompetitive practices.
The verdict in this case is likely to have a significant impact on the industry. Realtors who are members of NAR may be required to change their business practices to comply with the antitrust laws. For example, realtors may be prohibited from discussing commission rates with each other and from setting minimum, or blanket, commission rates for buyer’s brokers.
What it could mean later
The verdict in this case is a major development for the real estate industry. Realtors should be aware of the verdict and should take steps to ensure that their business practices comply with the antitrust laws. Realtors should also be aware that the verdict could lead to increased scrutiny from the government and from private plaintiffs. Individuals and companies that engage in anticompetitive practices could be subject to civil lawsuits, criminal charges, or both.
It is important to note that NAR has defended the clear cooperation rule, arguing that it is necessary to protect consumers and promote competition in the real estate market. NAR has also appealed the Burnett verdict in the Missouri case and so they may, ultimately, prevail on the merits of the case. Again, only time will tell.
It remains to be seen how the verdict in this case may impact the real estate industry in the long term. However, the verdict is a clear signal that the courts are willing to scrutinize not only NAR’s rules and policies, but also long-established industry practices.