When word got out last week that the U.S. Justice Department filed an antitrust lawsuit against the National Association of Realtors over its new policy for online property listings, the powerful trade group was quick to respond.
“We believe the new (Internet Listings Display) policy is fair, pro-consumer, pro-competitive and accommodates innovation,” NAR announced in a written statement.
The trade group cooperated with the DOJ’s two-year investigation leading up to the lawsuit and had been negotiating with the agency for months to come up with a policy that would lift the DOJ’s antitrust concerns.
The DOJ complaint accuses NAR of mandating a policy that obstructs real estate brokers who use innovative Web-based systems to offer lower costs to consumers.
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.
The violations can be broadly broken into three waves of litigation: commission price-fixing, restrictive Realtor association membership requirements, and MLS membership price-fixing.
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 court losses the group has suffered produced rulings that have established a number of 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 the National Association 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).
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 did not succeed in the case of Freeman v. San Diego Association of Realtors (2003), in which the Ninth Circuit Court of Appeals found there was illegal price fixing for MLS services in San Diego County.
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 a full copy of the judgment; publish a full copy of the judgment in the real estate sections of Sunday editions of the San Diego Union-Tribune newspaper; and publish in its regular membership magazine at least once a year for three years (1985-1987), an article explaining California and federal antitrust laws as they applied to real estate brokerage in the state.
The board also had to submit to the state attorney general a copy of its then current bylaws and MLS service rules and regulations once a year for the same three-year period. The judgment also forced the board to include in its MLS orientation course a presentation explaining California and federal antitrust laws as they applied to real estate brokerage in the state and in their application to MLS transactions. The orientation was to include a presentation of the NAR movie, A Look At The Law – Antitrust, or similar updated audio-visual materials that explained antitrust laws.
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