Just over a month after the U.S. Department of Justice pulled out of a proposed settlement with the National Association of Realtors to broaden its investigation into the trade group’s rules, the agency has intervened in a federal antitrust suit against the trade group filed by discount brokerage REX Real Estate.
REX sued NAR and Zillow in March, alleging antitrust violations for a NAR rule, dubbed the “No-Commingling Rule,” that prompted Zillow to segregate non-multiple listing service listings from MLS listings on its website, including listings from REX.
In motions to dismiss in July, NAR and Zillow hit back against REX’s allegations that it is the target of an illegal boycott. One of NAR’s arguments was that a 2008 consent decree with the DOJ allowed Realtor-affiliated multiple listing services to require that MLS listings be searched separately from listings obtained from other sources.
But on Tuesday, attorneys for the DOJ submitted a statement of interest in the case “to prevent the drawing of unwarranted inferences from a now-expired 2008 consent decree” between the DOJ and NAR.
“By claiming that the government ‘approved’ the search policy in the attachment to the 2008 consent decree … NAR implies that the government has determined that the policy — and by extension the No-Commingling Rule — is consistent with the antitrust laws,” the DOJ’s attorneys wrote.
“That implication, however, is incorrect. The 2008 consent decree resolved the United States’ antitrust claims against NAR for specific exclusionary policies targeting brokers using innovative online platforms. In that case, the United States did not examine the rest of NAR’s policies, including the No-Commingling Rule, and therefore those policies simply were not subjected to antitrust scrutiny.”
“The 2008 decree did not affirmatively determine the policy challenged in this case (or any other NAR policies noted in the attachment to the decree) to be pro-competitive or lawful,” they added.
Moreover, the DOJ stressed that the decree was no longer in effect.
“The decree expired in 2018 and should not be read to apply to industry developments, such as the massive growth of Zillow into an allegedly critical platform for marketing homes directly to consumers (as opposed to through a multiple listing service), which hardly existed in 2008.”
Even if the decree were still in effect, the DOJ pointed out that it contained a provision that expressly said the agreement would not limit “the right of the United States to investigate and bring actions to prevent or restrain violations of the antitrust laws concerning any Rule or practice adopted or enforced by NAR or any of its Member Boards,” and therefore NAR cannot use the decree to “shield” itself from future investigation or challenge.
The DOJ noted that NAR had also tried to use the 2008 consent decree “to shield conduct that the government neither investigated nor challenged in the 2005 case that resulted in the decree” in two pending commission cases against NAR, known as Moehrl and Sitzer after their lead plaintiffs.
In statements of interest filed in October 2019, the DOJ similarly alleged NAR was inaccurately portraying the 2008 settlement agreement in those lawsuits and that that agreement only resolved the DOJ’s antitrust claims against NAR “for its exclusionary policies targeting brokers using innovative platforms” and did not regard any other NAR policies.
According to the DOJ, the courts in the Moehrl and Sitzer cases both “properly declined to draw any inference in favor of NAR from the 2008 consent decree” and requested that the court in the REX case do the same.
In an emailed statement, Mantill Williams, NAR’s vice president of communications told Inman, “NAR firmly believes we have always accurately described the implications of the consent decree we agreed to with the DOJ in 2008. NAR continues to believe the lawsuit has no merit and remains confident our rules and policies promote a pro-consumer, pro-competitive market for home buyers and sellers.”
The DOJ’s statement of interest notes that the agency “takes no position on any other issue in the case,” and therefore the agency’s view of the actual rule at issue in the case is unknown. But the filing comes at a time when federal regulators appear to be turning up the heat on the real estate industry through appointments at the Federal Trade Commission and through an executive order that encouraged the FTC to exercise its rule-making authority “in areas such as … unfair occupational licensing restrictions; unfair tying practices or exclusionary practices in the brokerage or listing of real estate; and any other unfair industry-specific practices that substantially inhibit competition.”
In a press release, REX CEO and co-founder Jack Ryan praised the DOJ’s action.
“The real estate cartel’s house of cards is set to topple,” he said. “Since March, we have been in court challenging big tech and big industry collusion. We appreciate the Biden Administration’s decision to intervene on behalf of consumers which will continue to focus the magnifying glass the administration has put on the national real estate cartel’s archaic anticompetitive schemes.”
Zillow declined to comment for this story.