National Association of Realtors Files Petition Opposing DOJ’s Withdrawal from Settlement Agreement
John Jordan | September 14, 2021
CHICAGO—The National Association of Realtors on Sept. 13 filed a petition to quash a request by the U.S. Department of Justice that NAR states reneges on the terms of a settlement agreement approved by the DOJ in November 2020.
The DOJ attempt to withdraw from that fully binding agreement in July 2021, after NAR had already begun to implement its terms, is a breach of the agreement and the law, NAR officials stated.
“The DOJ action should be considered null and invalid based on legal precedent alone,” said NAR President Charlie Oppler, a Realtor from Franklin Lakes, NJ and the CEO of Prominent Properties Sotheby’s International Realty. “The DOJ must be governed by principle, and NAR simply expects the department to live up to its commitments.”
NAR alleges in its petition that the Department of Justice is trying to back out of its agreed-upon obligations. “By its action, the DOJ thinks it should be free to reconsider the terms of an agreement at any time, for any reason—or no reason at all,” Oppler said. “If that view prevails, it would undermine the strong public policy in favor of upholding settlement agreements and public confidence that the government will keep its word in future cases.”
NAR officials note that the guidance for local broker organizations has long been recognized to ensure fair and competitive real estate markets for home buyers and sellers. In fact, having the listing broker pay the buyer broker’s commission increases competition, by allowing small brokerages to compete on a level playing field with large brokerages and promotes equitable home ownership opportunities for all consumers.
“NAR remains hopeful the DOJ will honor its agreement,” Oppler said. “We also remain committed to advancing and defending independent and local real estate organizations that provide for greater economic opportunity and equity for small businesses and consumers of all backgrounds and financial means.”
On July 1, the Department of Justice announced its intent to withdraw from the settlement it had reached the previous November in order “to permit a broader investigation of NAR’s rules and conduct to proceed without restriction.”
The U.S. Justice Department has also filed to voluntarily dismiss its complaint against NAR without prejudice. The department stated in an announcement that it determined the settlement “will not adequately protect the department’s rights to investigate other conduct by NAR that could impact competition in the real estate market and may harm home sellers and home buyers.”
“The proposed settlement will not sufficiently protect the Antitrust Division’s ability to pursue future claims against NAR,” said Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division back in July. “Real estate is central to the American economy and consumers pay billions of dollars in real estate commissions every year. We cannot be bound by a settlement that prevents our ability to protect competition in a market that profoundly affects Americans’ financial well-being.”
In July, the National Association of Realtors released a statement to the media in reaction to the U.S. Justice Department’s actions, which stated that the withdrawal from the settlement was a “complete, unprecedented breach of an agreement” that had been reached with the DOJ’s Antitrust Division.
“Grounded in our commitment to act in the best interests of buyers and sellers, we regularly update our rules and policies to protect consumers and provide transparency,” the spokesperson stated according to a Housingwire.com report. “NAR has fulfilled all of our obligations under the settlement agreement and now DOJ is inexplicably backing out. If the department does not live up to its commitments under the terms of the agreement, we are confident in our pro-consumer and pro-competition policies.”
The Department of Justice explained that in its complaint and settlement filed on Nov. 19, 2020, it alleged NAR had established and enforced certain rules and policies that illegally restrained competition in residential real estate services. The proposed settlement sought to remedy those illegal practices and encourage greater competition among Realtors, but it also prevented the department from pursuing other antitrust claims relating to NAR’s rules.
The department stated that it sought NAR’s agreement to modify the settlement to adequately protect and preserve the department’s rights to investigate and challenge additional conduct by NAR, but the department and NAR could not reach an agreement.” Because the settlement resolved only some of the department’s concerns with NAR’s rules, this step ensures that the department can continue to enforce the antitrust laws in this important market,” the DOJ stated.
Back in November 2020, Real Estate In-Depth reported that NAR General Counsel Katie Johnson in the Realtor Magazine section of NAR’s website, stated, “Our rules and policies have long been recognized for creating a competitive and efficient market that benefits home buyers and sellers. This agreement resolves the DOJ’s questions about the multiple listing service (MLS) and commissions and enables NAR to remain focused on supporting our members as they preserve, protect, and advance the American dream of homeownership.”
NAR 2021 President Oppler added in a videotaped statement back in November, “We want to be absolutely clear that while NAR disagrees with the characterization of our rules and policies and NAR admits no liability, wrongdoing or truth of any allegations by the DOJ, NAR has agreed to make certain changes to its rules to address the questions raised by the DOJ.”
NAR’s Johnson, who also serves as the association’s Chief Member Experience Officer, stated that although the exact language of the settlement agreement was still being finalized for NAR’s rule changes, 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.
“Buying a home is one of life’s biggest and most important financial decisions,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division stated back in November 2020. “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.”
According to the complaint that has now been dismissed, DOJ alleged that NAR’s anticompetitive rules, policies, and practices include: (i) prohibiting MLSs that are affiliated with NAR from disclosing to prospective buyers the commission that the buyer broker will earn; (ii) allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; (iii) enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered; and (iv) limiting access to the lockboxes that provide licensed brokers with access to homes for sale to brokers who work for a NAR-affiliated MLS. These NAR rules, policies, practices have been widely adopted by NAR-affiliated MLSs resulting in decreased competition among real estate brokers, the DOJ charged.
NAR General Counsel Johnson went on to state on the NAR website that in accordance with the MLS system’s long-standing focus on creating an efficient, transparent marketplace for home buyers and sellers, the amount of compensation offered to buyers’ agents for each MLS listing will be made publicly available. Publicly accessible MLS data feeds will include offers of compensation, and buyers’ agents will have an affirmative obligation to provide such information to their clients for homes of interest.
“Relatedly, the rule changes re-affirm that MLSs and brokerages, as always, must provide consumers all properties that fit their criteria regardless of compensation offered or the name of the listing brokerage,” NAR’s Johnson wrote.
She also noted that there will be a rule enacted that will more definitively stated that buyers’ agents cannot represent their services as free to clients.
Finally, with the seller’s prior approval, a licensed real estate agent will have access to the lockboxes of properties listed on an MLS even if the agent does not subscribe to the MLS, NAR added.
“In entering this agreement with the DOJ, NAR disagrees with the DOJ’s characterization of our rules and policies, and NAR admits no liability, wrongdoing, or truth of any allegations by the DOJ. The agreement does not subject NAR to any fines or payments,” NAR’s Johnson stated last November.
She continued, “We’re proud to be associated with the MLS system that puts consumers first and benefits home buyers, sellers, and small-business brokerages—and is constantly building upon these principles. This agreement furthers NAR’s and the MLS system’s goal of creating an efficient marketplace that fosters cooperation between brokers for the benefit of consumers.”