Editor’s note: In this three-part series we examine the real estate record on antitrust. Since realty professionals 24 years ago became subject to federal antitrust law, dozens of lawsuits and regulatory actions have been taken. Learn what some of those cases are, who’s behind them and how the industry has reacted. (See Part 1: Once free of the Sherman Act, it haunts business today and Part 3: NAR perspective on antitrust.)
In the 1970s, Eugene Palsson, a flight engineer and a licensed real estate agent, asked to join the Marin County Board of Realtors in California. His membership – and access to the board’s multiple listing service – was denied. The board had a bylaw in place that required board members to be primarily employed in the real estate business. And, according to a board rule, MLS access was provided exclusively to board members.
The real estate agent contested the decision, and the board filed a lawsuit. The California Supreme Court ruled in this 1976 case, Marin County Board of Realtors vs. Palsson, that the board’s rule and bylaw were antitrust violations.
“The board’s rules denying access of nonmembers to the multiple listing service must be eliminated,” the court ruled, and “the board should be enjoined from enforcing or promulgating any bylaw or other rule which conditions associate membership on primary engagement in the real estate industry.”
David Barry, a San Francisco lawyer who is sometimes vilified by the industry for his work in antitrust litigation, said the Palsson case inspired his interest in antitrust law. “That was an access case,” he said, as it related to an agent’s access to an MLS system. “I was captivated by that. Antitrust cases are rare – they’re almost unknown. It’s obscure,” he said.
Barry, whose office is situated on a pier that overlooks San Francisco Bay, gestured toward the hub of the city and said the examples of antitrust cases in any courthouse are few and far between. That’s part of the attraction. Also, he said, “It’s an absolutely fascinating area of law.”
Barry’s high-profile work in real estate-related antitrust litigation spans a quarter century. He has confronted Realtor associations many times during his career on antitrust issues. He is well known to his supporters and his opponents alike, and he says his work has led to some positive changes for the industry as a whole. There is still a lot of room for improvement, though, he said.
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Barry spoke to Inman News last week about antitrust law and his pursuit of justice.
INMAN NEWS: What was your first experience in working with real estate-related law?
BARRY: I specialized in malpractice defense – everything but doctors. I got to know real estate brokers, and I got to like them as a group.
INMAN NEWS: Is antitrust litigation today more common than it was in the past?
BARRY: It remains obscure. The number of times when the marketplace gets restrained are pretty rare.
INMAN NEWS: What is the source of antitrust litigation for the real estate industry?
BARRY: NAR (the National Association of Realtors). It’s NAR that makes it a hotbed of activity. I suspect that NAR and local (associations) fixed prices from day one.
INMAN NEWS: What sort of penalties do antitrust law violators face?
BARRY: The penalties have been a complete joke. NAR has learned an important lesson: You can lose (in court) and still not lose any money. Are they going to take a hit? Yes. The cost of litigation is getting higher.
INMAN NEWS: What was your first real estate-related antitrust case?
BARRY: It was in 1979. It was against the board of Realtors of San Francisco. (A group of Realtors) believed that the MLS should be available to the public – not for free but for a fee. We lost that but I saw how restrained competition was in the real estate world. Another thing I learned from the San Francisco case was that you’re better off in federal court. Antitrust is a subject matter (some state judges) have never seen in their whole careers. Antitrust is a field that takes mastery.
INMAN NEWS: What is it like to go up against such large entities as the National Association of Realtors in court? Is it intimidating to be involved in litigation with such large groups?
BARRY: There is a rumor that when you take on a very powerful defendant they will bury you in paper. It is just a myth. It is not true at all. The rules do not permit it. You can’t bring frivolous cases because they will be dismissed. Wealth really is no advantage. The judge could care less. It’s who’s right.
INMAN NEWS: What is interesting to you about antitrust law?
BARRY: I’m a math major. I know the economics behind antitrust law and I know the math behind the economics.
INMAN NEWS: What is the most important case you’ve handled relating to real estate antitrust law and why?
BARRY: The Freeman (Sandicor) case. The actual violation occurred in other markets. The corrective effects – suddenly, people said, “We’d better stop it now.” It had immediate beneficial effects. In terms of the industry cleaning up their abuses? No.
INMAN NEWS: Will real estate-related antitrust violations continue indefinitely, in your opinion?
BARRY: It’ll change. It’ll flip overnight. (Real estate groups) have errors and omissions (insurance) policies that protect the board and directors. If these (antitrust) cases become common enough and expensive enough – (insurers) are not going to insure that.
INMAN NEWS: Who stands to gain from the work you are doing in real estate antitrust law?
BARRY: The work I’m doing now will benefit agents first. San Diego brokers (in the Freeman/Sandicor case, for example) were collectively overcharged – they pass on costs to all of their customers. Collectively, they’ve got to pass that on somehow – all of that will get passed to consumers.
INMAN NEWS: How much do real estate agents know about antitrust law?
BARRY: They’re experts at it – they know when they’re being restrained.
INMAN NEWS: Which industries tend to be the most frequent violators of antitrust law?
BARRY: Real estate is one of the worst because they will not learn because they’ve never had to pay. They will only learn when they start to pay. There’s the music copying industry – percent-wise the music-copying industry is the worst. And the movie industry – in the ’30s and ’40s there was a linkage between studios and theaters – studios owned theaters or controlled them. Independents couldn’t get their films into theaters.
INMAN NEWS: Is your job a thankless job? What types of feedback do you receive from the real estate community?
BARRY: I get love letters. My plaintiffs speak for a lot of victims, and I really appreciate the e-mail I get. Real estate agents are fearful of speaking out; they believe, “bad things will happen to me.” (My clients) represent a lot of silent victims.
INMAN NEWS: Does your work have the potential to benefit new business models and discounters in the real estate industry?
BARRY: That’s what it’s all about is competition. Price competition and other competition. It’s about buyer choice. It doesn’t mean lower prices. There’s nothing wrong with higher prices for higher services. (The rise of new business models) is nothing like industries that are having thousands of jobs outsourced. The real estate industry is inherently a person-to-person business. And one that’s never going to leave our shores. Consumers want a professional to hold their hand in this terrifying moment (of buying a home).
INMAN NEWS: Do you take on some cases that you know will lose?
BARRY: All of my cases are winners. There are lots of ways to win. Most cases settle. The reason that some cases only go so far – it takes so much money (plaintiffs may choose not to pursue them).
INMAN NEWS: What are your ultimate goals in real estate-related antitrust litigation?
BARRY: I want MLSs to be open without (subscribers) being forced to pay for trade association services. That’s very near on the horizon.
Tomorrow: The National Association of Realtors answers key questions on antitrust.
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