The National Association of Realtors is facing a $4 billion problem as an antitrust trial kicks off, but a bigger issue could be coming down the pike.
The Department of Justice is considering its own case against NAR after years of investigating the trade group for alleged antitrust behavior, Bloomberg reported. The department has taken a particular interest in the commission-sharing system at the heart of the landmark lawsuits that could change how buyers’ brokers are compensated.
The Justice Department this June filed an appeal after a judge ruled the agency couldn’t reopen an investigation into two NAR policies: the Participation Policy and the Clear Cooperation Policy. The department came to a settlement in its investigation of NAR under the Trump administration that would head off any further probes, but withdrew from the proposed settlement under the Biden administration.
Attorney General Merrick Garland has also sought to intervene in other NAR cases. Recently, the Justice Department asked for a two-month delay on approval of a potential settlement in a Massachusetts antitrust lawsuit pertaining to commission rules.
As the Justice Department fights to reopen its investigation into NAR, $100 billion in broker fees paid by Americans annually hang in the balance.
Redfin CEO Glenn Kelman pointed to a Justice Department case as a much bigger threat to the residential real estate industry than the two ongoing antitrust lawsuits, sizable as they may be.
If the department ultimately dismantles the commission-sharing structure, it would create a “seismic change” in the industry, Kelman said, potentially putting half of the nation’s real estate agents out of work.
Redfin withdrew from NAR this month on the heels of the trade group’s internal issues and concerns over agent compensation.
Jury empanelment began this week for the class-action case known as Sitzer/Burnett in Kansas City. The plaintiffs are challenging the participation rule, arguing that NAR colluded with several large brokerages — some of which have already settled — to hike agents’ pay in violation of the Sherman Antitrust Act.
The participation rule requires listing brokers to offer compensation to buyers’ agents. The plaintiffs argue that the rule creates a conflict of interest for buyers’ agents and prevents buyers from determining a commission amount based on performance.
The remaining defendants could be on the hook for $4 billion in damages, including $1.3 billion in commissions members of the class-action suit paid to buyers’ agents in a seven-year span.
— Holden Walter-Warner
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