The DOJ weighs into the NAR pocket listing lawsuit
The National Association of Realtors (NAR), while exempt from antitrust investigations by the Department of Justice (DOJ), doesn’t mean the trade group is immune from antitrust enforcement.
The DOJ filed Monday an amicus brief in Top Agent Network’s antitrust lawsuit over NAR’s Clear Cooperation Policy. This requires brokers to submit listings to their multiple-listing service within one day of marketing a property. The Clear Cooperation Policy was adopted by NAR and the San Francisco Association of Realtors. This lawsuit claims that the Clear Cooperation Policy violated antitrust laws and unfair competition laws.
The lawsuit was originally filed in May 2020, but was thrown out by a U.S. District Court located in Northern California in August 2021. It is currently being heard at the U.S. Court of Appeals in the Ninth District. Top Agent Network filed its opening brief to appeals court in January. The DOJ requested permission to file an amicus brief shortly afterwards.
The DOJ clarified in its brief that it is not reviewing the case on the merits, but to correct legal errors made by federal district courts.
Top Agent Network stated that it was glad that the DOJ had voiced its opinion on the case.
David Faudman (CEO of the firm) wrote in an email that “We are happy that the Department of Justice agrees with that the District Court applied incorrect legal standards when dismissing TAN’s Complaint.” “We are confident that the Ninth Circuit Court of Appeals agrees and that our lawsuit can proceed on its merits. Clear Cooperation Policy, which the NAR calls it, is both illegal and anti-competitive. Its rollout has been a disaster. Instead of accepting this reality, the NAR continues to pursue its ill-guided policy.
The DOJ claims that the lower court made three mistakes in its initial ruling. The DOJ claims that the lower court based its antitrust injury analysis on the wrong product market.
“TAN argued that the Policy’s deterrent impact on brokers’ and agent’s use of off-MLS listings services harms competition within the upstream market. (1) By denying the relevant consumers (brokers or agents) of choice in how they serve their customers because ‘agents not members of a large brokerage won’t be able to properly serve their customers seeking to market off MLS… and (2) by impeding, eliminating, or impeding listing networks that might compete, resulting in a MLS in most major markets. “Restrictions on consumer choice and exclusions of new market entrants are against fundamental antitrust policy.”
The DOJ also claims that Top Agent Network’s claim that Clear Cooperation Policy “has not forced more listings onto MLSs but instead has forced off-MLS listing into ‘office exclusivities’ at large brokerages.”
The DOJ also found that the lower court incorrectly concluded that Top Agent Network’s business model was anticompetitive, as it restricts its members to only the top 10% of agents within a market.
According to the brief, “Any practice that adds property listings into MLSs would have to be considered procompetitive.” Any rival service that is not available for all agents and takes listings out of MLSs would also be considered procompetitive. “That premise and District Court’s reasoning ignored market realities, and the ways competition can actually work. New competitors can take market share from the dominant provider, replace the dominant provider entirely with a better product, or create a niche product that is preferred by certain segments of the market. However, the District Court’s reasoning effectively prevents any off-MLS competitor from challenging MLSs within that upstream market. This is because it improperly entrenches the dominant market position for the NAR-affiliated MLS.
The DOJ believes that the lower court implied that Top Agent Network’s alleged conduct was anticompetitive and prevented the firm challenging the Clear Cooperation Policy.
The brief states that “The Supreme Court made it clear that the antitrust laws’ purposes, which include promoting competition and deterring uncompetitive behavior, support private lawsuits against antitrust violations regardless of whether the plaintiff also acts anticompetitively.” “[I]f TAN could possibly be said to have broken the antitrust laws (which was not determined by the District Court), it could be held liable in another case. However, TAN’s alleged anticompetitive conduct doesn’t preclude it challenging NAR’s policy.
NAR and SFAR can submit an answer brief until April 20.
NAR did not respond to a request for comment at time of publication.