NAR’s antitrust lawsuit returns as defensive attitudes persist

For America’s industry trade groups, boycotts have proven an effective, if hawkish, strategy to influence change.

But this ham-fisted strategy continues to land California’s largest real estate trade group in hot water.

This time, a three-judge panel reversed a district court’s previous dismissal of a lawsuit filed by The PLS.com, LLC (PLS) against the National Association of Realtors (NAR) in an April 2022 opinion.

PLS’s lawsuit claimed NAR, as a competitor in the listing network services market, conspired to take anticompetitive measures to prevent PLS from gaining a foothold in the market.

PLS operates a private multiple listing service (MLS) for exclusive listings (sometimes referred to as pocket listings) for sellers who do not want their personal information widely distributed. High profile clients are extra sensitive to sharing their home’s details or their identity on a large-scale platform such as NAR’s MLS, which requires such information.

NAR’s Clear Cooperation Policy, which took effect in 2020, requires NAR-affiliated MLS members who choose to list properties on competitor real estate databases (such as the PLS) to also list those properties on NAR’s MLS.

The trial court found no harm to consumer homebuyers and sellers in February 2021 as a result of NAR’s policy, and thus found no antitrust violation. Seeing no harm to consumers, the judge dismissed the lawsuit, expressed in the Central District of California opinion.

However, an appeals court revived the lawsuit, finding injury to a particular class of consumer — the agent. The appeals court’s panel agreed that the Clear Cooperation Policy harmed buyers’ and sellers’ real estate agents — as the consumers of listing network service products.

The appeals court held the definition of the term “consumer” is not limited to one who buys goods or services, but also includes a business using a product as an input to create another product or service.

Thus, PLS was not required to allege harm to homebuyers and sellers to allege antitrust injury. Their allegation that the Clear Cooperation Policy harms buyers and sellers’ real estate agents as the consumers of PLS’s and the MLS’s listing network services suffices as an argument.

NAR’s per se group boycott, as one judge labeled it, prevented the competitor PLS from gaining a foothold in the listing network services market. Consequently, this left agents with fewer choices, less competitive prices and lower quality products.

No stranger to the Sherman Act

The Sherman Antitrust Act is a federal statute prohibiting companies from engaging in unfair business practices, like forming a monopoly.

PLS’s lawsuit points to Section 1 of the Sherman Act, which defines and bans specific anticompetitive behaviors. It explicitly prohibits conspiring to restrain trade or commerce.

Violations of the Sherman Act are deemed per se violations when an individual proves unlawful conduct has occurred which restricts interstate commerce and restrains competitors from reasonably operating within the framework of a fair free market.

These allegations — group boycotts and unlawful restraints of trade — is nothing new for NAR. The organization has been accused of antitrust behavior many times throughout its history.

As recently as 2020, the U.S. Department of Justice (DOJ) examined NAR for anticompetitive rules over restraints to free trade, according to the DOJ’s antitrust division.

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National Association of Realtors settles U.S. Department of Justice antitrust lawsuit

Although the DOJ dropped their investigation in July 2021, they are still investigating more possible antitrust practices within the trade organization.

In fact, the DOJ is keeping a close watch on the PLS case. In an amicus brief, the DOJ also stressed that homebuyers and sellers are not the only consumers harmed by NAR’s per se group boycott — a reiteration of PLS’s argument.

A few short decades ago, NAR was steeped in similar antitrust claims. In an unlawful move, they excluded agents from accessing the MLS when agents dared to deviate from NAR’s uniform practices.

A California appeals court held NAR’s conduct constituted an unlawful restraint of trade and unlawful business activity by openly encouraging its members to maintain uniform commission rates on residential sales (generally, 6% or a 50/50 split). Further, the court found the exclusion of non-Association of Realtors (AOR) board members from the residential MLS to be a group boycott. [People v. National Association of Realtors (1981) 120 CA3d 459]

NAR’s poor track record for allowing consumers (agents, buyers and sellers) and fellow market participants to compete deprives everyone in real estate from experiencing higher quality services and more competitive prices.

Perhaps it’s time the largest organization for real estate agents recognizes a need for a significant overhaul to its coercive practices — starting with their Clear Cooperation Policy.

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