When word got out last year that the U.S. Justice Department was investigating the National Association of Realtors over its new policy on online property listings, the powerful trade group was quick to respond.
“(NAR) has received and is complying with a request for information from the Antitrust Division of the Department of Justice for information relating to association policies and rules governing the display by real estate brokers of residential listings data on or through the Internet,” the association announced in a written statement at the time.
Realtors have an extensive record of defending charges of price-fixing, restraint of trade and other unfair business practices. Since 1950 the National Association of Realtors and its state and local affiliates have challenged, won and lost many cases.
In the antitrust area alone, the Realtors over the past 50 years have fought approximately 60 antitrust-related lawsuits, of which they’ve won more than half.
The violations can be broadly broken into three waves of litigation: commission price-fixing, restrictive Realtor association membership requirements and MLS membership price-fixing. It remains to be seen whether NAR’s virtual office Web site policy, which is the subject of the Justice Department investigation, will trigger lawsuits that could be added to the list.
San Francisco-based attorney David Barry has spent nearly a decade compiling more than 1,000 pages of appellate court documents that summarize Realtors’ court battles.
The sheer number of antitrust cases brought against and lost by Realtors is “astonishing,” considering such cases are rare in state courts, Barry said. “Most (state court) judges will never see an antitrust case in their lifetime.”
The court losses the group has suffered produced rulings that have established a number of realty-related precedent-setting judgments, including decisions that established federal jurisdiction over certain Realtor association activities.
The price fixing case, United States v. National Association of Real Estate Boards (1950), in which NAR and the Washington Real Estate Board were sued for fixing commission rates in Washington, D.C., established that the Sherman Antitrust Act applied to Realtor services. At the time, Realtors argued that the federal law applied only to trade in goods, not services such as those provided by Realtors. The U.S. Supreme Court ruled otherwise.
Cases that tested a similar argument targeting state-level antitrust laws also lost, including Marin County Board of Realtors v. Palsson (1976). That case confirmed California’s antitrust law, the Cartwright Act, applied to Realtor associations “when membership in an association is a practical economic necessity.”
Other cases fundamental in determining that federal courts had jurisdiction over certain Realtor association activities include Bratcher v. Akron Area Board of Realtors (1967) and McLain v. Real Estate of New Orleans (1980).
“The cases…established that price fixing by real estate agents was illegal under the Sherman Act if sufficient interstate commerce effects could be proven,” said Barry. He added that typically “several hundred thousand dollars of impacted interstate commerce (was) sufficient to trigger federal jurisdiction.”
A less common technical defense raised by Realtors argues that the Realtor associations are incapable of conspiring because they each operate as a single enterprise. That defense has never succeeded. Such was the case in the Realtors’ most recent loss, Freeman v. San Diego Association of Realtors(2003).
The courts also have been instrumental in opening access to Realtor-owned MLSs by abolishing restrictive Realtor board membership practices, including those that denied membership to part-time sales agents and brokerages that employed them. The cases included Grillo v. Board of Realtor of the Plainfield Area (1966), Oats v. Bergen County MLS (1971), Pomanowski v. Monmouth County Board of Realtors(1979), U.S. v. Realty Multi-List (1980),Collins v. Main Line Board of Realtors (1973).
Getting busted for antitrust violations is embarrassing and expensive. In People of the State of California v. National Association of Realtors et al (1984), the court determined the San Diego Board of Realtors had participated in illegal tying arrangements, price fixing and other “unlawful MLS activities.” The judge’s orders instructed the board to pay civil penalties, legal costs and other fees that totaled nearly $127,022; publish in its monthly magazine an article explaining the judgment, including