NAR shifts on “participation rule” days before antitrust trial

Other side’s lawyer calls change “admission of guilt”

NAR Changes Interpretation of Participation Rule
From left: NAR president Tracy Kasper and U.S. Attorney General Merrick Garland (Getty, NAR)

Days before the start of a seismic trial, the National Association of Realtors appears to be changing its interpretation of a critical policy, though perhaps not enough to assuage the Department of Justice.

NAR is claiming listing brokers can offer buyers’ brokers zero compensation when listing a property on a Realtor-affiliated multiple listing service, Inman reported. The commission rule is at the heart of a class-action lawsuit set to go trial Oct. 16.

The Sitzer/Burnett case alleges the trade group’s “participation rule” violates antitrust law by inflating sellers’ costs. The rule is also at the center of another class-action lawsuit expected to go to trial next year.

NAR’s previous interpretation of the rule required listing brokers to offer compensation to buyer brokers. Now, NAR’s spokesperson said, the policy “requires participants to communicate an offer of compensation to other MLS participants and that offer can be any amount, including $0.”

NAR’s statement didn’t acknowledge that as a shift in policy, but the lead trial counsel for the plaintiffs in Sitzer/Burnett did. “If there is now a sudden change in this long-standing policy, it’s a stunning admission of guilt,” Michael Ketchmark said.

Ketchmark added that NAR’s former general counsel has testified under oath that an offer of zero would fail to comply with the rule.

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Two of the four major franchisor defendants in Sitzer/Burnett — Anywhere Real Estate and Re/Max — have already settled and agreed to change business practices. While the financial penalty of losing the lawsuit could be immense for the defendants, NAR is also dealing with another issue: the Justice Department.

The two sides are in appeals court regarding the participation rule. The agency wants to evaluate it based on merit, while NAR wants it left alone. NAR notes that the department agreed to close the investigation in a since-scuttled settlement.

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A recent move by the Justice Department doesn’t bode well for NAR. In a similar antitrust case in New England that doesn’t involve NAR, attorneys for the agency wrote “that merely tweaking a buyer-broker commission rule to allow zero-percent commissions does little to ‘unfetter a market from anti-competitive conduct.’”

In other words, shifting the compensation model to 0 percent likely doesn’t go far enough in the eyes of the Justice Department to comply with antitrust laws.

The agency’s investigation would run independently of the class-action lawsuits as long as an appeals court allows it to go forward.

Holden Walter-Warner